Have you applied the latest hotfixes?
I will have to check with our server admin (unfortunately he is on vacation this week)
We have the same issue in our environment running 7.8.1 (Live, Test and Dev). What are the hot fixes that we need to apply?
Should the drop down search automatically on all attributes or does it need configuration in knowledge?
I don't remember if it was the cumulative hotfix for 7.8.2 or 7.8.3, we have been installing them all as we go since then. The drop down will search on whatever you have configured in the Output Attribute Template under the raise user (we have it search for Title, Name, and Email).