What happens if User B moves his cursor to position 0 at the same time that User A types at position 0?

Depending on the order that those events arrive, and how ordering is disambiguated, it's possible that different peers could see User B's cursor at different positions.

I believe that the system you're describing is akin to an OT system, but where the "operations" to transform are the "cursor move" actions that occur simultaneously with insertions and deletions. Most OT systems, on the other hand, are trying to transform inserts and deletes against one another.

Edit: Yes, in fact this is equivalent to OT if you replace every OT insert or delete with a tuple [move cursor, ins/del] in your system.