Sorry just to add to this:
The above is an image of adding a user. I have also tried typing in the same text into the "new user" dialog but yield nothing. So the fact that I get one result in one area and another in another (one which is expected) and another which is not I am inclined to think that there is a glitch.
Can I confirm that the code for this lookup (new users screen) is in ajax.users.php?
