Good tips in this thread. It ultimately led me to my solution. The problem computer here was also running a version of Windows XP modified with NLite.
I was able to resolve this problem by first opening the faulty keyboard log. On the problem computer, it was located in C:\Windows\system32\faultykeyboardlog.log.
The faultykeyboard.log file simply listed these four items:
I went to a computer that I knew had an unmodified version of Windows XP Professional, copied those four DLL files from C:\Windows\system32. I then transfered them to the C:\Windows\system32 on the problem computer and re-ran the manual installation file for
KB2686509 which can be downloaded at