Currently allowArbitrary is hardcoded to true, meaning that the widget will accept any input, even if not a real user.
This means you can input any string and press enter, and a tag will be made. If exists is true, there will be an error; otherwise there will be no error. (To see an example of this behaviour, go to Special:Preferences with $wgEnableUserEmailBlacklist = true and enter a nonexistent username. Click Save and the form will submit with no error.)
It should be made possible to set allowArbitrary = false, so that a tag will not be made unless the string entered is valid. This is already possible for both the TitlesMultiselectWidget and the NamespacesMultiselectWidget.
Solving this will involve more than simply allowing the config to be passed. With allowArbitrary = false, the tag is not made when a menu item is selected. From a cursory look into this, it appears that when the menu item is selected, the input value is cleared, so the menu items are never added. (Filed as T243075.)