I was about to write a very long and tedious post about my struggles but finally I have have figured it out. Thanks to a very handy tool called ShortcutDetective, I found a rogue app that was opening randomly out of nowhere and intercepting the key event.
Now this got me thinking. Consider ShorcutDetective is a tiny utility whose functionaility would surely fit inside KM, wouldn't that be nice to have the tool available right in the editor?