If you're absolutely certain that you've actually assigned the team, then you should report it on the bugs thread.
My recollection is (I don't have the game open at the moment) that there's a button you need to push after you've got the name of the team showing up, i.e. that it's easy to think you've assigned the team when actually you haven't. I could be wrong about this, though.
To make sure the team is actually getting un-assigned, close all windows after assigning the team, then re-open diplomacy. If you see the team where you think you assigned it (and then it disappears after assigning another team), then you're correct. If not, it sounds like a bug. It's hard to understand how this bug would be implemented, though, since Aurora uses a relational database, so there tend not to be arrays sitting around that you can run out of room in.
John