Actually the command structure is that you specify the canned cycle first with the line name that the start of the shape definition starts on within the line defining the cycle, then you define the shape between G81/G82 and G80.
Any tool radius compensatation actions (G41/G42 through to G40) are then used within the confines of the shape definition!
The only way to access a "Shape" is via canned cycle such as G85 (roughing), G87 (finishing) etc...
for example: (ignoring the usuall startup codes...)
N100 G0 X Z (RAPID TO START POINT)
N102 G96 S(Surface Speed)
N104 G85 NTURN D... F... U... W...
NTURN G81
N106 G00 X(strt point)
N108 G1 G42 Z...
N110 shape
.
.
.
N200 G40 X Z
N202 G80
N204 G00 Xhome Zhome G97 S...
.
.
Rest of program blah blah blah
The Shape defined between line NTURN and N202 is not accessed until "called" by a canned cycle such as the G85 roughing cycle above.
If you take out the roughing cycle and let the program run through, it will get to line N102 and then jump to line N204 (in the above example).
THEREFORE you need to have your tool nose radius compensatation INSIDE the G81/G80 commands.
You can actually do simple things such as defining the roughing cycle and then on the next line define the finishing cycle. I used to do this all the time if I was using the same tool to rough and finish with.
N100 G0 X Z (RAPID TO START POINT)
N102 G96 S(Surface Speed)
N104 G85 NTURN D... F... U... W...
NFIN G87 NTURN
NTURN G81
N106 G00 X(strt point)
.
.
.
N200 G40 X Z
N202 G80
N204 G00 Xhome Zhome G97 S...
In this example the program will rough the shape and when the roughing cycle is finished the machine will return to the Cycle start point, then read the next line which is the G87 finish turn cycle.
When the finish turn cycle completes it will NOT return to the cycle start point so you need to be carefull when doing ID work that you program a correct excape tool path (or have new tools on standby

).
Once the Finishing cycle is complete it will read the next line (NTURN) see that it is a shape definition line and then jump to the end of the shape definition G80 and carry on from there.
Hope this clarifies your situation.
Regards
Brian.