I have this problem on 2 different PCs - one Pentium 233 and another PentiumII 500 (Compaq Workstation 400). On the 1st PC - it never boots automatically when keyboard is plugged in. It doesn't matter whether I pressed any key while computer booted (before grub showed of course) or not. timeout option is set in grub.conf. But, if I don't have keyboard plugged in, it starts counting down and boots. Keyboard is AT style, not PS/2. On the 2nd PC - sometimes it boots automatically, sometimes not. More often not. Didn't try w/o keyboard (PS/2) though. I chose Severity as high, as it's a big problem - I cannot reboot PC remotely for example.
I see in another grub related bug report Alan Cox suggested clearing keyboard buffer when grub starts. It might help in this case too.
This works on all of the machines I have. This really sounds like BIOS bugs and not something I can do something about.
Why not try to clear keyboard buffer? See bug 134029. BTW, forgot to tell, that this problem didn't happen on 1st PC with FC2. It started only after an upgrade to FC3. So I reopen the bug, but of course you cannot do anything, except maybe trying to clear keyboard buffer when grub starts. Or is it like that already?
Most likely it's not actually something in the keyboard buffer, but rather grub restarting itself in the wrong mode. What's your config file look like?
It is a standard one, I only tried to comment out hiddenmenu, but it didn't help: default=1 timeout=5 splashimage=(hd0,0)/grub/splash.xpm.gz #hiddenmenu title Fedora Core (2.6.10-1.737_FC3) root (hd0,0) kernel /vmlinuz-2.6.10-1.737_FC3 ro root=/dev/sda3 quiet initrd /initrd-2.6.10-1.737_FC3.img and a few more kernels.