Okay folks hope all is well.
As a hopeful final update to this curious case, I think I have an answer. After a series of baffling connecting evidences, I am sure I figured out what was going wrong.
For starters the demo (attract mode) always worked well initially. It was only when it no longer did I asked for answers.
This is where it got confusing. I would unplug a USB device and re-plug and it would work. But only temporarily. I would unplug a IDE drive and it would work, but only temporarily. I would seemingly fix the problem only for it to reappear.
Then I got (finally) thinking. Why did it work before? Why all the changes with only temp results?
I went to USB under Device Manager and turned off Auto Power Save. Boom!
I guess some update screwed things up, but that is the fix. I scrolled up though the above replies to be sure I hadn't missed any advice. Why was my keyboard and mouse still working fine though? Why did this affect my X-Arcade so randomly and nothing else?
Anyway, thanks for your time. Hope this helps somebody in the future
GameEX Arcade is awesome and still the only one. Add a few more "Fav's" though. WTH were you thinking? Eight trillion menu's with one "fav" category! WTF!
Embarrassing ya.