Autocomplete: how to make it work with an editable iframe instead of input element (95% done, include jsfiddle)?

Autocomplete: how to make it work with an editable iframe instead of input element (95% done, include jsfiddle)?

This is a rephrasing of my earlier question with runnable code -  hopefully someone can help.

I want to use an editable iframe for the source of the autocomplete.  In the js fiddle below you can see it pretty much works, except the cursor UP/DOWN keys don't do anything.

There's a js fiddle of it here (it works in Chrome, not IE11 because of the iframe implementation): 


My idea would be to handle the keydown in the iframe and call something in autocomplete, eg

$('#tags').autocomplete('widget').next();

But I'm stuck and have waaay too many tabs open in chrome/my brain.

Thanks