I found the answer after reading some other blogs and trying different things.....I originally tried the SMC and the PRAM resets because I was unable to get into the machine. It kept going into safe boot mode, and then still wouldn't boot at that. ANSWER!!!!
It ended up being that I had a 'stuck' shift key. I don't know which one it was, but I alleviated the problem by plugging in a USB keyboard. I used it for typing in my username and password, and NOT the standard keypad. It worked! So I then tested further by opening a word (or text) document, and typing with the macbook air keyboard. All characters were in caps, no matter which 'shift' key I pressed. Time for a new keyboard...........at least I'm still under AppleCare! I hope this may help some of you out there.