Well, it sounds like the option is being set at least.
Beyond that, I'm afraid I won't be of much more help.
"setup" is definitely being set, however, you're correct that as soon as you have any value in there it produces two errors in the CMS;
f is undefined - tiny_mce_src.js Line 9365
tree.setCurrentByIdx is not a function - LeftAndMain_left.js Line 26
So, it could be a conflict between TinyMCE and one of the many other scripts, and that's way beyond me, sorry.
Perhaps there's a better place to fire a setup event?