So, if I understand that correctly an "Operation Dynamo" (units under attack in a completly surrounded Dunkirk retreating to transports either at sea or in port) is not possible?
Yes, it is possible if the German AI first captures and keeps troops in all provinces surrounding your beachhead and you then wait until your units are out of org (no volontary retreat). Your units will then retreat out to waiting transports. It is possible but highly dangerous (and most likely bugged).