Adam,
If you add the HTML snippet from my original post to this example (under Windows XP or Vista and IE7), you should see the issue. Just to be clear, I'm referring to behavior of the dropdown list in the Normal pane, not the Preview pane. Also, if you click it twice in rapid succession, the list will stay down. But this really isn't a workaround because it's unintuitive for the end-user.
It does work under Safari for Windows. In Safari, I don't see the toolbar refresh when I drop down the list, which makes me think that whatever JavaScript event is being invoked when the list is dropped down, it's not handled in Safari. It doesn't work at all under FireFox, but I know this is due to the way FireFox handles the contenteditable attribute, and I see the same thing with FireFox in other .NET rich text editors. Under IE, this works with all other rich text editors I've tried.
Thanks for your help!