Y combinator discussion in "The Little Schemer"

So, I've spent a lot of time reading and re-reading the ending of chapter 9 in The Little Schemer, where the applicative Y combinator is developed for the length function. I think my confusion boils down to a single statement that contrasts two versions of length (before the combinator is factored out):

A:
  ((lambda (mk-length)
     (mk-length mk-length))
   (lambda (mk-length)
     (lambda (l)
       (cond
         ((null? l) 0 )
         (else (add1
                ((mk-length mk-length)
                 (cdr l))))))))

B:
((lambda (mk-length)
      (mk-length mk-length))
    (lambda (mk-length)
      ((lambda (length)
         (lambda (l)
           (cond
             ((null? l) 0)
             (else (add1 (length (cdr l)))))))
       (mk-length mk-length))))

Page 170 (4th ed.) states that A

returns a function when we applied it to an argument

while B

does not return a function

thereby producing an infinite regress of self-applications. I'm stumped by this. If B is plagued by this problem, I don't see how A avoids it.