I did indeed get it working in Cubase Pro 8.0.0 (was having fun playing with it like a 2 year old, watching it expand and shrink at the button press).
But … I think it was slightly more than simply giving the Arrange window and/or Inspector focus, I had to click around and muck around for a bit to get it in that “working” state.
I don’t remember what it was, but twice I noticed this. I think it was like clicking on another pane in the inspector, or, giving the inner parts of the Fader pane focus … something.
Anyway, both times, once I did this magic sequence of things, it would then consistently perform the toggling with only the Arrange window being given focus.
Update: I just got it working yet again. It’s giving the Inspector tab focus, once. After that you only have to give the Arrange window focus (until you relaunch Cubase, of course).
I have not tried a keyboard shortcut key, only a function key on my CMC AI (F3, in this case).