Using KDE Desktop v4.8 + Ubuntu 12.04
When using ANY application that requires password authentication (except login as it's set to auto) such as download updates, installing new aps etc, I cannot type anything into the box - won't accept ANY keystroke! My keyboard is working perfectly - can type in Documents etc.
I turned Wallet service off, but that did not make any difference. I would appreciate any constructive suggestions to get out of this annoying mess.

Have you tried disabling Desktop Effects?
Are these GNOME or KDE dialogs which are prompting for your administrative password? Do other elements of these dialogs respond (when clicked, hovered by the mouse for instance)

My system settings -> account details -> password & user account and look for the Password Prompt section is set to show one bullet for eah letter - but it shows none! So this time I followed someones's suggestion & typed the password (not seeing any letters) & it worked!!!
Obviously there is a bug here - I'll report it.
Thanks for ypur help. THIS THREAD IS CLOSED.

Once you have filed a bug, please post the link here so others can track the issue as well.
If you select other bullet options, do those work?