IIRC, that handler was one of the last Draco's works, I clearly remember when he included it into source tree, Insert key in Kobold + some other things in Aniplayer stopped to work, i.e. it wasn't totally bug-free.
That's very nice of you, that you tell me it *now*, and not when I worked on the handler. What a pity you didn't wait even longer with the complaints, maybe 50 years would fit better? Now I am not even sure if someone hasn't introduced a bug into the code (which _used_ to happen in the past).
By the way, the symptoms you describe clearly point to problems with interrupt handling, *or* that a register is clobbered that it should not. But the keyboard handler really does not use any interrupt directly, it just hooks into BIOS vector where raw scancode is passed to. So I'd look for problems somewhere else.
Pozdrawiam KMK