Hey @badgerer,
You're playing very complicated games with disparate systems that aren't designed to work together, so of course there are bumps in the road. Some of these can be worked around by more sophisticated use of Keyboard Maestro – some can't.
Try the Typinator demo, and see if it does a better job with your text replacements.
It should, because it's purpose-built for that task – but no bets.
I use it myself instead of Keyboard Maestro for most text replacement operations.
I make a case for “Why Typinator?” [here].
-Chris