I upgraded to 7.04 but when the login screen appears it is not recognising any keyboard input. The keyboard works fine and is connected (tested it during the memory check at bootup - it cancels the extended memcheck fine).

This is on a standard desktop system.

Mouse input works fine.

I can shell to the machine.

Any way to fix this without a reinstall/repair (ubuntu offers a repair?)

Well, this might not sound comfortable but try plugging the keyboard in and out and rebooting your machine a few times. I just saw a system freeze after which keyboard and mouse refused to work, another mouse worked fine but keyboard only trough USB. Repeated reboots and plugging the device in and out, trying if it works (it worked in BIOS no problems, but not after OS started to load), and finally it "just started working again". Unfortunately I didn't find any reason for this, but you shouldn't do any reinstalls (nor repairs) before trying something as "barbaric" as rebooting

I have tried rebooting and plugging in the k/b several times but to no avail.
The keyboard has a ps2 connector. No more ps2 to USB connectors lying around.

I can also vnc to the machine but I'm getting strange behaviour when connecting to the machine as a user is yet to login; it's showing part of the desktop background and that's it - no Gnome or anything else.
SSH offers me plenty of control for now but I wouldn't mind being able to monitor downloads and play media on the machine as using vnc as an interim solution.

EDIT:
Nevermind that. I am able to login using xdmcp. When the server shutsdown or when I log off I use all control and have to force the machine to shutdown. So it seems I can login but not logout. Though these are all symptoms of the k/b problem

Booting into recovery mode doesn't help either. No keyboard input is possible. X does accept mouse input. Is this fixable?

I was about to reinstall Ubuntu when I found out the keyboard doesn't work with the live cd either - browsing the bootup menu is no problem. Arrow keys etc work but when the wizard arrives at the test your keyboard stage no input is possible.
This would seem to be a 7.04 issue - the keyboard worked fine with 6.10.

From time to time when booting into Feisty Fawn I was unable to enter my user-name and password ,sometimes rebooting helped but mostly it didn't.
When rebooting into Windows XP the keyboard worked as expected .
The keyboard is an USB "Microsoft digital media" connected to the machine via a PS/2 connector .
The keyboard-problem was solved by eliminating the PS/2 connector and plugging the USB-connector directly into an USB-port .
OEF !