This will be super useful to have.
@certik, can you try the codemirror branch. I have fixed the up/down issue there. Also, shift-enter will render the text cell and enter is used to enter edit mode on a text cell.
This issue is fully fixed in codemirror. I will keep this issue open until codemirror lands in the htmlnotebook branch.
The codemirror branch is merge, so I am closing this.