It'll rotate and move a selection, but it won't actually scale to make the image bigger or smaller. Also, while it's possible to still skew the image (or tilt, I suppose. It's the double arrow symbol with one arrow going one way, and the other arrow going the other way) it's unnecessarily difficult. I have place my cursor in the perfect position to do this.
Any ideas on how to fix this, or why Krita is doing this?

I also uninstalled and reinstalled the program. That did not work either.

You need to use the small rectangles in the middle of the edges and in the corners.

I am. That's the problem - it's not working. It doesn't matter where I place my cursor. All I can do is move the selected area and rotate it. That's it.