That sure sounds like corrupted driver files then. Are there any bad sectors on the OS partition? If the disk was on the way out it might've corrupted the driver files. Working for BIOS/F8 would seem to indicate that, because as far as the MOBO and KB are concerned, they work. It's W2k that's broken.

At this point I'd be tempted to just suck it up and reinstall the OS.

-Zeke