Hi Kim,
The way you are trying to do this deviates from the way that Media Center does things... if you look at how the up/down buttons work in Media Center, they are not focusable with the keyboard, only the mouse, and the mouse click doesn't affect the focus which is on the item selected in the list. Clicking on the up/down button moves to the previous/next item in the list, with the focus.
Your options are to use NavigateIntoIndex to set the focus, and then use NavigateInto to get back to the button, or alternatively there is a private API that would be able to do this for you - search this forum for AreaOfInterestLayout. Bear in mind that this is an internal API call, may change without notice via a Windows update (though not very likely I think), and may change with new versions of Windows.
Given the above, I'd recomend using the same approach Media Center uses itself (mouse focusable up/down buttons, with the key focus on the item in the list) rather than invent a new UI approach.
Cheers,
Andrew