@wombatie Do you mean your regular cursor? Or the mouse cursor? Usually when I do a @___ a list of users come up and I click the one with my mouse that I"m tagging. I don't use arrows or return to select, but that works too. It's just harder to see. I think if you do space bar, the list just follows your cursor without actually tagging anyone. You can hit Esc to cancel out of the tagging.
Which broswer are you using? Have you tried rebooting? Maybe something got stuck and a clean reboot might help.