Is this a Desktop, or Laptop? If a desktop, have you tried a different (non USB) keyboard?
Recently I've been having this problem with the Windows XP Welcome screen. After so many logins, the Welcome screen refuses to allow me to type my password. By this I mean, when I click my username and click the password field, no cursor shows up. No asterisks/"blobs" appear. Blindly typing my password does not work either.
I have researched this problem a little. It turns out, it is due to a Windows Update (KB923191). However, this computer has Service Pack 3 installed, and this update is rolled into it. So, it is (probably) uninstallable.
Microsoft only has suggested a workaround: hitting Ctrl+Alt+Del twice at the Welcome screen then typing in user/password.
Does anyone have a miracle fix? Thanks for your time.