Pressing Return, which is how you select the kanji characters that correspond to the phonetic words that you typed, inserts the kanji as it should, but then unhelpfully replaces the Japanese characters with a newline. :-P
I don't personally care that much, though; TextMate 1 was actually pretty bad, IMO. It was slow and buggy, with nothing much special about it except its bundle system for extensibility. That was indeed a killer feature, but TextMate bundles can now be used by many other, much better, editors like Sublime Text 2.