I'm running Debian "sarge" rc3 distro with a 2.4.27 kernel, which works great.
When I try to install or use the 2.6.8 kernel with my USB KVM, Debian halts on startup.
If I plug the devices directly into the system, I have no problems.
KVM? Yeah. Kernel 2.6.8? Yeah.
I compiled a custom 2.6.8 kernel to see if I could get around the issue (I am admittedly a Linux novice), but had no success.

Hardware:
AOpen AX3S motherboard
133MHz FSB
512MB PC133 SDRAM
40GB ATA100 harddisk
Intel i815 chipset
Intel 82815 on-board video
Microsoft Intellimouse Optical 5-button USB mouse
Logitech Elite USB keyboard
IOGear Miniview Extreme 4-port USB KVM

When I boot into a 2.6.8 installation startup halts when detecting the keyboard:

drivers/usb/input/hid-core.c: ctrl urb status -2 received
drivers/usb/input/hid-core.c: timeout initializing reports

input: USB HID v1.10 Keyboard [Logitech Logitech USB Keyboard] on usb-0000:00:1f.2-1.3

drivers/usb/input/hid-core.c: ctrl urb status -2 received
drivers/usb/input/hid-core.c: usb_submit_urb(ctrl) failed

Has anyone run into this issue with a USB device on kernel 2.6?

I dont know about KVM but USB seems horribly buggy since 2.6.8. I often have to do dirty shutdown because some weird USB bug is preventing init to shutdown properly, so instead of shutdown, my box stay mindlessy up waiting for some infinite loop to stop and filling my logs with crap.
I don't know if your problem is anyways related but my guess would be to try a kernel older than 2.6.8, like 2.6.7 or before.