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The list of suggestions will not be updated after each keystroke since this would be too costly. Instead of that, the list is updated on specific events which occur regularly. For example, the list is updated as soon as you enter a new paragraph. Therefore, a misspelled word will be suggested for only a relatively short amount of time.
Why are no suggestions shown when the text cursor is positioned in the middle of a word?
The list of word completion suggestions is purposely only shown when the cursor is positioned at the end of a word, or more specifically, when there is a whitespace character to the right of the cursor, including the end of line. Otherwise, you would be able to insert some word in the middle of another word, which has proven to be very confusing when writing a text.