If I change the "editor.tabs.expand=true" line to false in preferences.txt, it doesn't make tabs not expand to spaces. Instead, the tab key does nothing (I.E., can't tell the key was pushed,) and when it auto indents, the indents are expanded to spaces.
I'm running XP SP2.
This is the only problem I have with the Arduino editor, but by itself it's basically enough to make me use an external editor.
I also think that tabs should default to 4 spaces long (in length, not expanded), but that is just me. Most of you Arduino'ers use a different set of standard program format when writing code. I've written a lot of C for PICs, so that is my background. (I also keep forgetting about the C++ features in Arduino.)