You just have to be in a position where the spell is usable when you enter it. It is possible you aren't entering the correct word - it may not be the first thing that comes to mind. I tried to make them not too easy to guess. You can use hints when looking at the note page to reveal extra letters to make sure.
Yes, didn't have time to figure out a way to save.
What do you mean your arrow keys are locked in the typing area? The arrow keys and space for move/interact should be completely separate from typing and enter. The cursor is shown when you can type, but you should be able to move around normally as well.
The cursor doesn't interact with the arrow keys, it's just a blinking sprite I added to indicate that you could type text into that field. There is no way for arrow keys to affect it, they only handle player movement. But if you can't move, then that is a problem. Are any of the keys working? Did the game lose focus? I found it was finnicky on itch and I had to click on the game before it would register any of my keystrokes. But I've yet to have it only work with some of them but not others.