I just loaded Slackware 10.1 onto my backup machine, clean install, had KDE working just fine until I ran a nice big update (tonnes of packages) one of the things updated was x11-6.8.1-i486-3 (and related packages).

My primary mirror is planetmirror.

When I rebooted and ran # xinit I got a fatal error saying my keyboard driver didn't exist.

The fix is to change line 199 (of /etc/X11/xorg,conf) from
Driver "Keyboard" to Driver "keyboard"

(Luckily it took me about 2 seconds to figure out what the problem was, since the Driver "mouse" uses a lowercase m...but that could have been hours of headache).

Is this an error in the package or did I do something wrong ?

There was a (small) change in xorg.conf between 10.0 and 10.1 detailed in the changelog and mentioned in the UPGRADE.TXT for 10.1. Here is the relevant text:

So further changing it to "kbd" may be advantageous?

(Though I must admit to being a little curious as to why the change wasn't there in a fresh install.)

Ah I see.

Regardless of that, however, I was already running 10.1 (clean install) before X11 conf got broken.

I'll just change it to "kbd" and forget about it thanks !