As I've pointed out before what you are doing is entirely pointless you may as well not use threads as you fire a thread off and then wait for the thread to complete before doing anything further.
You give precious little information about your CEvent but your WaitForSingleObjects are waiting for the thread to enter a signalled state (ie for them to exit).
As MyCommonFunction is where the actual potentially thread un-safe thing occurs you have correctly critical sectioned the area, however, threads 2 and threads 3 don't run concurrently. Remove the WaitForSingleObject from MyThreadFunction3 and then you will have both running concurrently in a thread-safe manner, thanks to the critical section.
That said its still a tad pointless as both threads are going to spend most of their time waiting for the critical section to come free. In general you want to structure threads so that there is precious little they need to hit critical sections for and then, when they hit a critical section, hit it only for a very short time (ie not the vast majority of the function's processing time).
Edit:
A Critical section works by saying I'm holding this critical section anything else that wants it has to wait. This means that Thread 1 enters the critical section and begins to do what it needs to do. Thread 2 then comes along and says "I want to use the critical section". The kernel tell its "Thread 1 is using the critical section you have to wait your turn". Thread 3 comes along and gets told the same thing. Threads 2 and 3 are now in a wait state waiting for that critical section to come free. When Thread 1 finishes with the critical section both Threads 2 and 3 race to see who gets to hold the critical section first and when one obtains it the other has to continue waiting.
Now in your example above there would be so much waiting for critical sections it is possible that Thread 1 can be in the critical section and Thread 2 waiting and before Thread 2 has been given the chance to enter the critical section Thread 1 has looped back round and re-entered it. This means that Thread 1 could end up doing all its work before Thread 2 ever gets a chance to enter the critical section. Therefore keeping the amount of work done in the critical section compared to the rest of the loop/function as low as possible will aid the Threads running simultaneously. In your example one thread will ALWAYS be waiting for the other thread and hence just doing it serially may actually be faster as you have no kernel threading overheads.
ie the more you avoid CriticalSections the less time lost for threads waiting for each other. They are necessary, however, as you NEED to make sure that 2 threads don't try and operate on the same object at the same time. Certain in-built objects are "atomic" which can aid you on this but for non-atomic operations a critical section is a must.
An Event is a different sort of synchronisation object. Basically an event is an object that can be one of 2 states. Signalled or not-signalled. If you WaitForSingleObject on a "not-signalled" event then the thread will be put to sleep until it enters a signalled state.
This can be useful when you have a thread that MUST wait for another thread to complete something. In general though you want to avoid using such synchronisation objects as much as possible as it destroys the parallel-ness of your code.
Personally I use them when I have a worker thread waiting for when it needs to do something. The Thread sits in a wait state most of its time and then when some background processing is required I signal the event. The thread then jumps into life and does what it needs to do before looping back round and re-entering the wait state. You can also mark a variable as indicating that the object needs to exit. This way you can set an exit variable to true and then signal the waiting thread. The waiting thread wakes up and says "I should exit" and then exits. Be warned though that you "may" need a memory barrier that says make sure the exit variable is set before the event is woken up otherwise the compiler might re-order the operations. This could end up leaving your thread waking up finding out that the exit variable isn't set doing its thing and then going back to sleep. However the thread that originally sent the signal now assumes the thread has exited when it actually hasn't.
Whoever said multi-threading was easy eh? ;)