Definately the keyboard. I removed it and VNC'ed to the box for a week with the keyboard out. Smell pretty much disapated (with the help of the dryer sheet.)
Left the sheet out and the keyboard for another week... No smell. Keyboard in a plastic bag, reaks.
Still reaking 2 weeks later. I plan to tear it apart and clean everything with some goof-off. If i ruin it, or can't fix it, I will try to buy a new keyboard that lacks the stench.
mine is a ibook g3 dual usb 14 incher, no airport, cd-rw/dvd combo. 700mhz.
I bought it for my wife to use for a "grade book" (teacher, 4th grade).. but she won't touch it because it smells like the kids after gym class.