This post is to help people who have a problem with composite output. I have solved this myself and I will describe my problem and solution. Relates to the Type 2 (512MB) Raspberry Pi.
I needed component connection as my sister has an old TV with only composite. I booted various images - Raspbmc and Wheezy and both had identical problem, no composite output. Both OSs booted perfectly fine but would not output to composite, although worked perfectly with HDMI. Tried booting with composite pulled out and then plugged it in after boot, still no composite. Then I tried botting with composite in and then put in HDMI cable, so now both composite and HDMI were plugged in. Bam! I got composite output. I then realised that it was the voltage/current coming from the hdmi cable that made the composite output work. I found out if I simply just touched the outer metal casing of the hdmi socket on the pi then composite would work, move it off the metal and then composite would not output any longer. I tired this with a usb cable plugged into my pc and then i touched the end again to the metal case of the hdmi connector on the pi board, it did the same thing and the component worked. SO I gathered it was simply the voltage/connection that was needed, I then realised the 3.5mm audio jack from my TV would prob have some voltage/current (to amplify the signal), so I plugged in a 3.5mm to 3.5mm audio jack from the pi to my TV.
It worked! The 3.5mm audio cable HAS to be attached to your TV too, in order for the component output to work properly and for you to get a picture through the composite.
I hope this saves someone some time, it was beginning to baffle me.
I now need to find out if I can turn this pi into a print (and possibly file) server if that's even possible