Okay I'm really lost on this one. After installing AMD Catalyst driver 12.1 on my laptop, it worked after a few tweaks. I was jumping with joy prematurely because the driver finally worked, only to find out later after a reboot that the proprietary driver went nuts yet again (same with the earlier AMD graphics drivers last year I've tried).
As usual when using fglrx I get a black screen instead of GDM, and if I do manage to get to a desktop I get the error from AMDCCCLE control panel that it cannot initialize because the device or driver is not found (something like that). So going back, Ctrl+Alt+F* keys are useless. After a couple reboots with the same result, I continued to recovery mode and deleted all fglrx related installs. I proceeded to reinstall a few packages as suggested on this page - http://wiki.cchtml.com/index.php/Ubuntu_Natty_Installation_Guide#Removing_Catalyst.2Ffglrx.
Note that I've done this several times without issues but the flgrx drivers. Whenever I reverted I always got everything back to normal. This time is not the same. Keyboard and touchpad are not working. The wireless mouse will work after I plug in the receiver when the boot reaches GDM, or I unplug-plug it. This is not a hardware issue. On Windows 7 and Live Ubuntu all 3 devices work properly without me doing anything.
I am answering my own question in the hopes that this would help others. Note that upgrading to a newer version or changing distro is NEVER a fix to problems like this. However, I cannot have my work laptop not work. So after 3 days of not being able to find a fix for the problem above, I had no choice. Desperate times call for desperate measures.
Found similar situations to my problem here on AskUbuntu but not enough to fix the problem. On IRC #ubuntu, the people were not familiar with the issue, so again, I got no fix. Search about the topic on the Internet didn't improve my situation although I found several leads, it still did not fix the issue.
Hence my only options were to re-install Natty Narwhal from scratch, which I did not want to do in the first place. My second option was to upgrade to Oneiric (using the network upgrade so all my personal data are retained). I did the latter and now my keyboard and wireless mouse is working without a hitch. However, the touchpad was still dead. The weird thing is that the touchpad works on Guest account but not on my regular user account. I created a temporary user to see if it will work, but no, touchpad is still dead in the water.
An answer here fixed the problem: Touchpad not working on Dell XPS L501x
The drawback is that on the next boot, the touchpad will, again, fail to work.
To fix this I placed the commands below in /etc/rc.local
This works on every boot so far.
If anybody knows how to properly fix this issue please update this post.