Ok so I learned "Fus" and then successfully absorbed the first dragon's soul (Mulminir was his name I think) to activate that shout. Then after some time I killed two other non-scripted dragons and absorbed their souls before learning another shout (disarm) but it never activated for some reason even though I had the souls of two previous dragons in the bag..

To activate a shout: Do I have to read a shout-rune first, absorb Dragon soul later? or does it work the other way round (absorb soul and THEN read shout-rune)?

Also, does it matter if I've killed these two unscripted dragons? are there an infinite amount of them or have I just wasted two dragon souls?

help would be so appreciated.

If you are playing on the 360 you have to press X in order to spend a soul on a particular shout

Go into your Spells -> Shouts menu, select your new Shout and there'll be an option to spend a dragon soul to unlock it.

^^
It's R on the PC and than remember to go under magic > shouts and select the new one, otherwise you will run up and hit Z to activate it and your old one will go off...lol not that I have personal experience doing that or anything.