For starters, in your demo when user A has selected some word and user B writes a letter in it, user A lost the selection. And this isn't even undo/redo yet, just normal collaborative thing.
That "some extra plumbing" you mention is quite big. Please don't get me wrong here – I would love to see you pull it off – Liveblocks.io seems like a good platform from what I read & heard, but you underestimate how hard that problem might be.