Within the SWOS folder, you need to create a new folder called SAVE.
You can then save the game easily. On returning from the save, if the game behaves as if a key is stuck, simply press a cursor key to return to normal.
Just tested on Winuae using Galahads install version 1.52(v2). After many hours of searching and frustration, this is THE best install for SWOS.
Perhaps Galahad could update the readme file in the install to mention the save problem.
Good Luck
Mark