I have had the same thing happen with a bad mouse. It took
a lot of troubleshooting to figure it out.

Your mouse just went bad or was it something else?

I just plugged in another keyboard.. same issue.

try checking system > preferences > keyboard Mousekeys tab and make
sure it is off.

Has the "Keypad not working" problem been resolved with you guys yet? Mine
now works. I guess with time it healed itself.

I did finally figure out the problem.
I spent a lot of time going through my laptop looking at settings to see
what was different from my desktop. And oddly enough, just as I found it
someone posted me on another group what to look for.

Apparently when on VNC (though not every time as that is the first time
its happened to me) a setting in System > Keyboard > Mouse Keys =
"Pointer can be controlled using the keypad" became checked. When this
happens - your number pad stops working. Once I unchecked that -
everything was fine again.

As a note: I have used VNC several times since fixing it without that
problem occurring again.

I went there and looked at Mouse/Keypad settings. It was not checked but
after that I never tried the keypad afterwards until yesterday and the pad
worked. Looks like even checking the settings may fix the problem. Looks
like computers "ARE" like magic, some days it works and some days it
doesn't.

On most laptops there is a function (FN) key that starts and stops
mousepad from working. There are times when one wants to have the
mousepad not working , say when typing a long document and ones fingers
accidentally touch the mousepad. The FN key is used (as one probably
knows) together with a F-number key. Find the relevant number key for
your computer to have control of that function.

The MousePad is toggled via the <FN> + <F7> key combination on an ACER ONE.
The first ACER ONE I had was sent back because the Mousepad stopped working
and I did not know why. I only had it a few days and the why they fail to
give even a basic few page manual until you go online and access it, I
didn't know that that key combo would toggle the mousepad. I called Newegg,
instead of any tech support, which I'm sure would have fixed the problem
they had me return it. Now I glad I did, the replacement has the bigger
battery so in the long run I did without a computer for a week or so but
ended up with a better one.

I have just discovered this too, as a result of an earlier post. ~My
Netboot has been out of action for over a week as a result. I eventually got
round to raising a query on
ubuntuforums.org/showthread.php just yesterday and
found the solution this morning reading back in this group.

Your experience on Tech support was similar to mine with Logitech wireless
keyboard, which the retailer sent back to the manufacturer who sent me a new
one. It had the same (software) problem of course, then after several technical
sessions with Logitech Support I solved it via a Tech newsgroup as being
infamous 'Mouse keys' again. (no deliberate pun on infamous!) I mentioned the
hack to Logitech and did not get a reply!