Aaaaahhh. I turn off Kasperski Security Suite and it all starts working. Wonder 's what's in that that could cause it. Soon find out...
...it's the web antivirus module that's causing it. I turn just that bit off and everything is fine.
Sorry I missed your question. I'm assuming its the same, even with the box ticked there's no toolbar for text formatting, all you get is the code window.
Fixed on mine now, in KAV Web Anti-virus settings I had streaming scan (whatever that means) set, switch that to buffering scan and all works fine.
I'm really sorry if this doesn't relate to your problem, I'd got this far assuming it was the same and its too late to go back now.