If you have an element that is binded to an attribute called selected it won't update in the DOM. For example:
<p v-bind:selected="selected">selected is {{selected}}</p>
<button v-on:click="selected = !selected">toggle</button>
Note that the {{selected}} template works fine, and the variable updates as well. It's just the attribute that doesn't update.
Here's a codepen that reproduces the problem: http://codepen.io/hay/pen/mOOrWK
Problem occurs in Vue 2.0.7. This example works fine in 1.0.28.