I had the same problem (xp install hang on windows logo testing because keyboard and mouse locked). I was using USB keyboard/mouse, but I couldn’t switch to non-USB because there aren’t any non-USB ports on the PC! I was using a standard USB mouse, but my keyboard was a non-USB that I’d plugged into a USB adapter. I swapped out the keyboard for a real USB keyboard, and that fixed the problem.
I know that doesn’t make any sense. Apparently windows install is fragile – who knew?
I guess the “fix” to this problem is to swap out your keyboard and/or mouse for something that they aren’t.