Hi KC, it's much the same for me as well. I can't erase with the eraser side of my pen either (I'm using a Toshiba Portege m200).
You have to click on the eraser button in order to erase any ink. (This works for me).
I guess you can classify it as a bug :P
Use the eraser icon in the toolbar. Inconsisten UI sucks, but the app is still cool ;).
You're right KC ... it doesn't detect the pen's eraser when I flip mine around. You actually have to select the eraser tool in order to erase.
Maybe you can drop the dev that created it a note and ask him to update it ;-)
(the sound of KC going 'ohhhhhhhhhhhhhhhhhhhhhhhhhhh' is heard) :-) thanks!