I have a Galaxy S2, Android 2.3.3, Gingerbread.XWKE7
I have "Auto-capitalisation" and "Space after picking" set.
These work OK for "Messaging" and "Calendar".
They do NOT work for
"Gmail" or any other mailer
Other typing apps like "Documents to go".
Prediction bar (offering words) work OK for all, but no suggested word is ever highlighted.
Weird