¿Esto suena natural? What I’m confused here is why he used past tense.

You are confused about “why he used past tense HERE”. This refers to a specific part of the sentence.

You can also say "what I'm confused about is why he used past tense here", but if you translate it this way then you lose the emphasis.

1) "What I’m confused about here is why he used past tense." = the "here" in this sentence plays a role to emphasise to the listener that you are confused about this precise place "here".

2) "what I'm confused about is why he used past tense here" = It's a bit more neutral. There, "here" doesn't play an emphasising role in the sentence as it is pushed towards the end of the sentence. As a rule, if you want to emphasis something (i.e. this particular instance "here" in the text where he used the past tense and you didn't understand it) then you will put the "here" towards the beginning of the sentence because you are more interested in that part of information.

It's perhaps a bit advanced English, but it makes a difference in the impression you give to the listener. In the first sentence, the listener would feel like you are emphasising to them that what you really want is an answer to THAT particular and specific place in the text (where he used past tense).