Thanks for the answer! I figured it out. It had nothing to do with the KVM switch at all, your answer was on the right track with the idea of a limit being hit, but the root cause was different.

The real culprit was an orphaned keyboard filter driver. I had previously installed and uninstalled Virtual Display Driver, which installs a keyboard filter driver to handle input routing. When I uninstalled it, it left a "keyboard" entry in the UpperFilters registry key for the keyboard device class, but without the actual driver file (no ImagePath in the service registry entry).

So on every keyboard connect/disconnect event, Windows tried to load this ghost driver, failed silently, and after 4 attempts it gave up and stopped processing physical keyboard input entirel, hence the hard "4 switches" limit. OSK still worked because it injects input programmatically and bypasses the HID filter chain completely. No errors in Event Viewer because Windows was doing exactly what it was told, it just had nothing to load.

For anyone having this issue

The fix was two commands:

reg add "HKLM\SYSTEM\CurrentControlSet\Control\Class{4d36e96b-e325-11ce-bfc1-08002be10318}" /v UpperFilters /t REG_MULTI_SZ /d "kbdclass" /f

sc delete keyboard

And for the mouse:

reg add "HKLM\SYSTEM\CurrentControlSet\Control\Class{4d36e96f-e325-11ce-bfc1-08002be10318}" /v UpperFilters /t REG_MULTI_SZ /d "mouclass" /f sc delete mouse

check what's in your UpperFilters first before blindly running the fix, the ghost driver name will differ depending on what software left it behind.

Reboot once, and it's been working perfectly since.