Can the computer boot into Windows safe mode? Do the mouse and/or keyboard work in safe mode?
Can you do a system restore to a previous time when the mouse and keyboard did work?
Did you try a real PS/2 keyboard and mouse, or USB-to-PS/2 converters? I ask this because I've often found that the USB-PS/2 converters won't work, particularly when installing/reinstalling Windows...I'll need to use a real PS/2 input device for it to even work at all.