well the way this sounds to me, this was previously booting directly to X, i.e. login on a graphical screen, but now it boots to a text console and still you can not even enter a user name?
i would investigate options in the bios to see if it is doing any kind of keyboard/mouse detection.
i also question what options were selected for hardware during install and what kudzu thinks it is detecting. if the appropriate selections were made for k/m during install, i would expect kudzu not detect and try to install a k/m. if kudzu is detecting something else, then it running might not be significant to this problem.
instead of using a knoppix cd for changes, why not boot to the redhat installation cd and enter
linux recover at the boot prompt and after selection of language/keyboard options, enter
chroot /mnt/sysimage to work as you would if redhat would boot with working keyboard. at this point, you could tweak the kernel if need be and take a look at the output of
dmesg and contents of "/var/log/anaconda.log" to see if those help identify what is causing the errors.
honestly i've never experienced a keyboard that wouldn't even work at the console so i'm a little stumped. one shouldn't need a mouse for a linux server so i don't even install those.