The answer actually lies in the js code. In nicEdit.js, find:
var nicEditorIFrameInstance = nicEditorInstance.extend({
Inside this, in the initFrame function initFrame find this.frameDoc.addEvent . Events are added here (via addEvent). This includes your keyup statement:
addEvent('keyup',this.YOURFUNCTIONAME.closureListener(this))
You need to add closureListener(this) to get this working. Then create YOURFUNCTION after the initFrame function as follows:
YOURFUNCTIONAME: function() {
This method worked for me. Hope this is for you too. nicEdit is by far the worst documented third party I've ever come across.
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