Idea is to use a border here instead of fully selected:

The status bar still says how to insert (tab not enter).

This is inspired by "editor.suggest.selectionMode": never which doesn't show a selection and passes tab/enter through unless down is pressed:

The border signals that it's focused, but it's different to the regular selection and therefore will behave differently.

We would probably want a selectionMode setting too, the exact form of it is an unknown since we would want to support everything editor.suggest.selectionMode does too.