That is a known issue.
A workaround is to create a tangent Datum plane first on the cylindrical surface. Use that to place the hole feature.
Then your callout will work. I believe it has been fixed in NX12
Ronald van den Broek
Senior Application Engineer
Winterthur Gas & Diesel Ltd
NX9 / TC10.1.2
Building new PLM environment from Scratch using NX12 / TC11
The datum plane workaround did not work. So LAME that it took them 12 versions to fix a "known issue". I guess I can say, I'm looking forward to NX 12 as we are still using 11.