stryx: From what you've written so far I don't think it's the installation files. That JD character is the pregenerated character, that the game comes with, just in case the player doesn't want to bother with character generation (which is laughable in U7 to begin with).
That's what support says in general to keyboard issues.
Keyboard/mouse not working
Additional info
CHECK ADMIN PRIVILEGES AND UAC SETTING
Please make sure that your user account has Administrator privileges and that User Account Control is disabled in your operating system. To do this, go to Start -> Control Panel -> User Accounts and Family Safety -> User Accounts -> Change User Account Control settings. Move the slider to the lowest position ("Never notify") and click OK.
Afterwards, launch the installer by right-clicking its shortcut and selecting "Run as Administrator". Each time you launch the game, you should use the “Run as Administrator” option as well, just in case.
If that doesn't help, try installing the game into a simple folder, like D:Test , to make sure that no problems are caused by Windows Virtualization technology.
DISCONNECT UNUSED, UNNECESSARY OR IN OTHER WAY UNUSUAL CONTROL DEVICES
If you're using multiple control devices (like multiple keyboards, mice etc, please disconnect (unplug) all except the ones you intend to play the game with.
How did you contact support? When I contact support I click on SUPPORT right next to ACCOUNT at the top of the screen, then go to Games Support, type in the name of the game (in this case Ultima 7), click on the appearing link, and then click on "I can't find solution for my problem" on the right side of the screen below "@contact our support team".
That brings you to an online-form, where you can describe your problem. So far when I have done that, I have gotten a response within a workday. But remember that today is saturday and the people at GOG will start working again on monday.
Thanks again. Good to know "JD" is supposed to be there. Gradually, with help from this forum, I am eliminating variables.
Yes, before writing to support or this forum, I followed the guidance to disable UAC, operate as admin and run as admin.
I have not tried the TEST folder technique, so that's next. But, again, no such problems with U9, so seems less likely that my system settings are interfering.
When I first wrote to support, I received an auto-reply that my question had been received. That was Wednesday night U.S. time (so early Thursday in Europe) and I was assigned a ticket number. It's likely that the weekend is getting in the way and while anxious to get this running correctly, I am not impatient with GOG Support.
Though I have not had success yet, I truly appreciate you taking so much time to help. You get Ultima points from me for Sacrifice and Compassion -- and maybe Valor, too!