If anyone stumblng here has problems with internal grid selection happening after OnSelectionChanged - after unsuccessfully trying out all the selection setters for a dozen hours the only thing that worked for me was reloading and repopulating DataGrid along with selected item. Not elegant at all, but at this point I'm not sure if a better solution exists in my situation.
datagrid.ItemsSource = null
datagrid.ItemsSource = items;
datagrid.SelectedItem = selectedItem;