I'm not that familiar with the 10th version (unfortunately), so I might as well be wrong, but knowing how other tools and commands work, I would say it's the envelope's structure (distribution of anchor points on the path) that distorts the object this way.
Try deleting all of the points on the envelope path except for the 4 in its corners, to see if it helps.
Top Object requires a single path (not text) to be top object in group for that function. Try that, but I dont' think that's what you are looking for. Try Effects, Distort & Transform, Free Distort. You can apply perspective using that or if you wish a perspective arch, use Effects, Warp, and set your perameters. BUT... if you'd like to really apply some great custom effects use Object, Envelope Distort, Make with Mesh. Now you can use the Direct Selection tool and make the design as you'd like ... and use Grouped Text.
Bob
It is a little hard to tell since your picture doesn't show any control handles (direction lines) or other selection feedback, but from the way it was distorted it looks like your envelope object was drawn with long control handles coming from the left side corners, and short ones at the right side corners.
If you want a symmetric distortion to the interior, the control handles have to be the same length and angle on both sides. (This is why it is working as you expect on circles and polygons.) Get the direct select tool, and play around with adjusting the lengths of the control handles, and see how the text inside adjusts. This sensitivity to the length of the control handles can be useful in some circumstances, where a skewed look inside the shape is desired.
With a fairly simple shape like you've illustrated, if you want a balanced symmetric treatment inside the shape, it is easiest to start with one of the canned Warp shapes (like Arch), adjust the parameters until it is as close as you can get it, and then use the Object>Envelope Distort>Reset with Mesh.. command to convert it to a mesh for the final adjustments.
For a more complex shape like, say, a facial profile, you will probably want to start with a hand-drawn envelope object, but maybe put more anchor points on the long curves of that shape than you ordinarily would, to make more beziers with shorter control handles, and try to make the control handles on a given bezier segment as balanced in length as you can.
Those top objects can be tricky...
Here's how I would make the shape you have in the screen shot:
1. Draw an ellipse (stroke only no fill), with about the curve you desire;
2. Drag the ellipse down (or up, whatever) to the other curve position and copy;
3. Discard the portions you don't need;
4. Draw a rectangle to fit the sides (with a fill);
5. With the pathfinder (specifically the divide tool) cut outside portions off;
Now try it with that shape.
Bert