There's a 1 second input tag on both mouse and keyboard. That I could maybe deal with, but if I press any key for longer than 1 second, it gets "locked" (as if it's continually being pressed) for a duration of ~10 seconds straight. This happens only when the game is running, both inside the game and if I get back to Windows Explorer using CTRL+ALT+DELETE keys.
The game is run with administrator privileges and tried changing V-sync settings too to no effect.
Any help is appreciated.

OS: Windows 7

I might have found a way to fix this. If v-sync is on, set the game to only use one cpu core in the task manager. Details > Set Affinity