I’m new to Illustrator and it is driving me nuts.
What I want to do is simply subtract a rectangle from a circle
On top of it, I draw a white rectangle, and use the Subtract from front from the Pathfinder.
What I get is:
while I expect
Simply use the Direct Selection Tool (the white arrow) to click the two inner anchors and hit delete.
It merely takes an extra step. Not everything is possible with a single click.
You will notice however, with your current method the ends of the open section will be angled on the circle’s arc. They will not be square as in your desired example.
If you want the end caps to be squared, you need to expand the circle so it’s a shape rather than a stroked path. Simply select the circle and choose Object > Expand. Then proceed to draw a rectangle and use pathfinder to minus front and you will get the desired results.