Hello ,
Using the existing setup as much as possible this is how I have gotten your project to work. I hope that this helps.
Example:
Here I added a Show mouse cursor and set it to true. This will keep the mouse from being captured while your widget is up.
I added an Event Destruct to the event graph. This calls a set input mode when the widget is removed from the parent. It will also hide the mouse.
I made no changes to the on key down event. I included this so that you could see the whole setup.
Make it a great day