I'm looking at this again today and I'm realizing the issue was
actually with my testing/expectations. While I'm using the iOS
simulator and I was using my laptop keyboard instead of the device
keyboard. There are no arrow keys on an iPhone/iPad... it's a touch
interface!! So the code in jquery-ui that handles up/down arrow
keystrokes does not work properly in the iOS simulator. But you can
select your item directly with the mouse in the simulator (and I
assume via touch on the real thing).
Matt