I tried rebinding the keys and that didn't work.

Yeah I mapped the Action key to the spacebar and other keys and same thing. I had no AV software on my previous version of Windows 7.

I just upgraded with a fresh install of Windows 7 Ultimate 32-bit and after I take care of downloading some drivers and updates, I'll take a whack at the game again. Also, I was using the standard US keyboard layout if that makes any difference.

Well, I just upgraded to Windows 7 Ultimate SP1, updated my graphics, chipset, and other drivers. The keyboard is listed as a "Standard PS/2 Keyboard" and the driver is supplied by Microsoft. Tried updating the driver but it's the latest one according to Microsoft and Acer doesn't list a seperate KB driver. So nothing out of the ordinary here as far as keyboard drivers go.

In short, I am still having the same issue just a different version of Windows 7.

Game is installed outside of Program Files, UAC is turned off, it's being run as admin, tried running it in Win95 mode, WinXP SP3 mode and so far the issue persists.

Amazing, I am out of suggestions. As a last resort, if you have a USB socket, maybe try an external keyboard . . . I'm tapped out on this one. =(

All other keys work as they should right?

I don't get the chance to actually use the other keys simply because I can't reach the actual gameplay where I might make use of the other keys :D.

Outside the game all of my keys function as they should.

Thanks for trying though.

One good thing that came out of this is got past Windows 7 Starter...There should be a law against that wanna-be OS.

I might try and install a Linux distro and see if the game runs as it should via Wine. I already have the USB install made and ready to go...

Well, I decided to bust out my sidewinder joystick and see if it was the keyboard.

It is not, I setup the sidewinder as a "joypad" and I still get the game refusing to acknowledge commands at some point during the opening dialogue on the boat. Very frustrating and unfortunate. Hopefully this isn't effecting most people, but I guess I'm glad the game was free. :(

once got a strange bug in Serious Sam, a one-off bug that proved to be a game-breaker. GOG support suggested an uninstall/reinstall, did the trick. apparently, dl was corrupted in one aspect of one file. simple, i know, but don't recall you mentioning a reinstall.

No good I'm afraid, reinstalled and the error is still occurring, now it happens even earlier into the opening scene (though it is still not always on the exact same line of dialogue). :(

Yeah, that's happened to me too.
I've basically been exiting my current stage, and reloading from my last continue.
It usually resets the buttons. Either that or I just restart the entire game.

It is annoying though...

I possibly have an answer for this.

I also had the problem where the dialogue would stop at about that part and well the way I got passed it was slow and annoying as hell.

Let it load the entire passage.

When the person is talking during cutscenes, don't press anything until you need to advance. I know it's slow but I finally got past the opening. I never had to do this afterwords.

Interesting. That seems to have worked. Thank you. That is a pretty stupid bug though.

Yup! That's the only time you should push anything during a cutscene. I haven't found another way yet.

Did the Action key work normally afterwards?

Yup, I could even skip character dialogue if it wasn't a cutscene!!!
Of course I'm not sure if it works with anyone but it's worth a shot