I have a partial fix for 1.7.x:
In groupsfrommembers/views/default/forms/groups/invite.php, add the following line before line 33 (which starts with "if (($members = get_entities"):
This will fix the problem with the member picker, but not the search. I still need to look at the search. To make sure you are always using the member picker, go to the groupsfrommembers settings and set it to a number that is larger than your maximum number of users. If I get a chance, I will look at a fix for the search function.
There is also an additional change that adds a link to the group invitations page to the email that is sent in groupsfrommembers/actions/invite.php. The changes are too complex to describe here. I will email you the file if you would like it. Just let me know.