Leggy scores again in 2019. Was about to ditch a much-used (software which won't run on Windows versions later than XP) Dell GX280 desktop with the symptoms described. Tried then using XP (32-bit) installed as well as 10 (64-bit) on a Dell Latitude E6350 laptop - SAME PROBLEM!!!
Followed Leggys' solution and found "Value Data" for "UpperFilters" was "kbdclass avgkbd" - AVG virus protection presumably added the "avgkbd".
Removed the "avgkbd" to restore "Value Data" to just plain "kbdclass" and reboot - FIXED!!!!!!!
Will try try this now on the Dell GX280 desktop but am confident of same result because the Dell GX280 desktop also has AVG antivirus installed.
Thankyou, thankyou, thankyou Leggy.