Downloaded. Installed.
I now have a character that can run through bunk beds, turn left or right but no other keyboard controls work, so I can't create a profile.
Reading several other posts on the subject, I installed the 1.05 unofficial patch, which installed properly.
Same problem.

I'm running on 32-bit XP, 3[and a bit] Gb Ram, ATI Radeon 6770, Athlon x6.
Psychonauts is installed to an uncompressed partition on an external drive.

Any clues ?

Thanks

This is a stretch, but if you are having problems with controls; or, to be more exact, with their unresponsiveness, I would wager you might have other auxiliary controllers plugged into your machine and active. If that is indeed the case, simply unplugging said controllers will fix the problem.
As I said, it's a stretch, but I remember having similar problems (with other games) due to a gamepad plugged into a USB port.