We've noticed that once you have added a new record to a lookup list, although the text value of the new item appears in the lookup field on the form, it is not selected.
This means the user has to then click back into the Lookup field and make the selection.
Is this a bug?
This does sound like a bug, newly added items should be automatically selected in the lookup field.
Have you tried it without any custom JS code on the form and in Incognito mode in browser? This will ensure that the cache/scripts do not break anything.
Also, what's the version of the app package that you have in the app catalog?
Sorry for the late response, the client is on the old version of the app 126.96.36.199 - so when we get the go ahead we'll update it and then test to see if the problem still exists.