Was the keyboard working successfully at one point and then all the sudden, stopped working as expected?
Before you go installing other apps, etc I'd suggest making a nandroid backup. That way if you do quite a bit to the phone before finding how to fix it, you can restore the phone to your current state and then apply the fix.
Once you make a backup, I'd suggest wiping the cache to see if something got stuck. It might not fix the issue at all but if it doesn't, you can restore from the backup anyway.
Also, is your sig correct, you're running Eclipse 1.2?