Click the 'Update' button in the left pane of Spybot S&D rather than the 'Search for Updates' button in the right pane.
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The integrated shredder has, as jonathanbean mentioned, been deactivated and is used only for cleanups currently, simple because there are many better stand-alone shredders out there.
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If you like, we would recommend an other tool for deleting sensitive data. The tool "Eraser".
http://www.heidi.ie/eraser/default.php
http://www.heidi.ie/eraser/download.php
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