I've had a similar issue just a little while ago (didn't figure it out until yesterday) on my Quicksilver. The system would boot to the desktop, stuff would run, but everything would be inoperable except for moving the mouse.
Here's how I was able to solve it:
- Hold the space bar while Mac OS is starting to bring up the Extensions Manager.
- Disable the ATI and NVIDIA-specific graphics extensions.
- Save and reboot.
My machine has a GeForce 2 MX in it, but I just left all of those off to be safe. As far as I can tell, everything works fine without them.
Hopefully that fixes it for you.