Hmm... I only have an iPad simulator with me, but it works just pasting in what I wrote above. Maybe something in your data URI is getting munged?
Keyup is used here rather than keypress (which fires only once for each down-up event) since backspace won't fire keypress events, which is a nice thing to have in a live environment. But I can't think of any environment which would implement keypress and not keyup, or how one might work around not having key events at all.
I did, however, discover that if you alert in mobile Safari (in simulation and on my iPhone) on a backspace keydown, the keyup never gets through and it will happily erase everything before the cursor.