While the autocomplete input field is searching the ui-loader.gif is not shown.
I analysed it and i am thinking the problem is the css order from ui dialog class "ui-widget-content". It does override the loading class from autocomplete ".ui-autocomplete-loading" hence the ui-loader.gif.
css: .ui-autocomplete-loading {background: white url('../img/ui_loader.gif') right center no-repeat; }