First of all, the input value over which you want to distribute must be Pay Value. Any other name will not do, even if the uom is Money.
And it seems that distribution over distribution seems to work (by accident, or by purpose?). When setting up the element link for distributed costing, it will tell you the element is not eligible for distributed costing since it is part of a distributed element set.
Remove it from ther element set, configure the element link, and add it back to the element set.