Microsoft Wireless Keyboard 3000

I recently purchased the wireless desktop which came with a wireless mouse
and keyboard. Everything was working fine and yesterday, the keyboard
stopped working. I tried changing the batteries, updating the driver, reset
the keyboard according to the instructions at least ten times and still
nothing. The wireless base station shows the function and number locks are
engaged. The desktop shows that the batteries are fully charged and the
signal strength is 4 bars. None of the keys work. Every so often, I hit a
key and it wanted me to designate an application to the hotkey.

Is this a defective item or am I missing something. The mouse which came
with the unit works flawlessly.

I would appreciate any help.