Actually, it is hard to generate a problem what only exists on your site. I mean, it always hard to re-create something what we have no clue about. I am using the same plugin on my site, and it works like charm. Only you thing you should do, just go to your administration panel and roll down the components section of the navigation bar. After jumping into the K2 options pop-up, feel free to disable the factory default K2 CSS. If everything is on a default state (that basically means you did not screw around with anything else before) the typography plugin should work. Moreover, there is an option to check out HTML strip tags. Just playing around with it for a while and you will get it.
Cheers! (oh, I hate to say that... so, take care tho! )