Thank you to everyone else that posted to this discussion group...your thoughts helped me to understand that this problem was not unique to my iBook G3.
My short version of this story...after a combination of 3 calls to AppleCare and 2 visits/5 phone calls to the Apple Store in Pasadena, CA, and one call to the Apple Store in Austin, TX (my home store)...I replaced the keyboard with one sent to me via Fedex from Apple. The install was very easy and my iBook is no longer an iSmell. So don't give up, hassle Apple till they replace your keyboard and refer to this discussion string to convince them your problem is not an isolated one.
Now for the drawn out -- longer story -- which should be described as an exercise in persistence. My only concern with Apple is if they are going to sell a computer insurance policy like AppleCare, then they should honor it. If they've priced the policy too low -- then they need to charge the appropriate, market-sustainable price for the policy and keep customer hassles to a minimum.
THE PROBLEM
After regular and repeated attempts to alleviate the "BO" coming from my keyboard -- yes, it is definitely the keyboard -- with "safe" cleaning products like Fellowes PC Cleaning Kit I decided that the odor was simply to horrible to live with. After an embarrassing stop at a relative's house to show them some of my photos from Spain, which constantly had to be interrupted by my profuse apologies for the horrible odor coming from my computer, I decided that was enough. My gosh...what were people going think I've been doing with this computer all day long...did I have too intimate a relationship with my computer?
MY FIRST ATTEMPT AT A RESOLUTION
So, I called AppleCare and explained to them the nature of the problem, mentioned this post with 200+ responses, and after their snickering ended, they told me this definitely fell into a user "sensory" issue and that they could not replace the keyboard. They thought that I "perhaps" spilt something on the computer and that was generating the odor. After pressing them that this was more than a "sensory" issue and a real problem, they suggested that I take the computer to an Apple Store Genius Bar to have them look at the computer. Possibly they could confirm the seriousness of the issue. Okay, I decided to do that.
MY SECOND ATTEMPT AT A RESOLUTION
As I was traveling for business, I stopped in at the Apple Pasadena store and scheduled an appointment to visit with a local genius. After about a 2 hour wait I was called up to chat with an amicable, but not quite a technical expert. After explaining the problem and getting past the suppressed laughing, the Genius agreed -- the computer definite had a body odor. But he also believed this was a user issue that AppleCare wouldn't cover. After a little pressing, he decided to check in with his colleagues, all of which were too busy to provide him input. Realizing that at this point they probably were not going to replace the keyboard at Apple's expense, but now thinking I didn't want the iSmell back "as is", I inquired about paying for a replacement out of my own pocket. I think this was the key moment that convinced the Genius that the problem was real -- I was willing to pay for the fix, even if Apple wouldn't. Again, as he was looking up pricing, I gently insisted that this was a real problem and asked if the Genius could ask anyone else to determine if AppleCare would cover this. Well, they decided it wouldn't be a bad idea to call AppleCare and confirm the BO without any presence of spills, or user-created problems. So the genius called AppleCare and 5 minutes later they approved the repair! Excuse me? The combination of an physical Apple employee witnessing the problem gave AppleCare the cover to approve the repair. Great. The pleasant genius ordered the part, I left the computer with the store because they could do the repair locally, and was told the repair should take 7-10 days.