I remeber this feature in psp 7 and it was great, but I can't seem to get it in psp 9. If you use the elipse tool for example, there is an edit option, but it won't let you add nodes or distort them at all.

They must not have removed this feature, right?

Nope, they haven't. There's a check box in the menu, says Show Nodes, make sure it's checked.