Ok,
Doing some more research into the issue. This only happens when vmWare Fusion 6 is running - and my Windows 7 Virtual machine is powered on. In fact, I am able to reproduce the issue quite effectively. I did switch to OmniGraffle (not Pro) and it is working great for me. Thanks.
When I have fusion and the Windows VM Running, if I quickly connect and disconnect the USB keyboard and mouse (it happens both with a Dell Wired Keyboard and mouse, and with a Microsoft Wireless keyboard and mouse) then my built-in trackpad and keyboard freeze. The USB keyboard works fine, the mac is operational and I can use it for days - only caveat, I cant use it without the external keyboard and mouse. The built in trackpad and keyboard are dead. I think It could be the USB Hub, ut doubt it. I am using a IOGEAR MiniHub 4-port USB 2.0 Hub. I will go out and buy a USB3.0 Hub and try to repeat this experiment.
With Microsoft Wireless Keyboard/Mouse:
1/13/14 9:07:59.000 AM kernel[0]: AppleUSBMultitouchDriver::_deviceSetReport - DeviceRequest for reportID 0xac returned with result 0xe0004051 - retrying
1/13/14 9:07:59.000 AM kernel[0]: AppleUSBMultitouchDriver::_deviceSetReport - DeviceRequest for reportID 0xac returned with result 0xe000404f - retrying
1/13/14 9:07:59.000 AM kernel[0]: AppleUSBMultitouchDriver::_deviceSetReport - DeviceRequest for reportID 0xac returned with result 0xe000404f - retrying
1/13/14 9:07:59.000 AM kernel[0]: AppleUSBMultitouchDriver::_deviceSetReport - DeviceRequest returned error 0xe000404f (interface 1, reportID 0xac, payload 2
1/13/14 9:07:59.000 AM kernel[0]: AppleUSBMultitouchDebug: _deviceSetReport returned an error in configureDataMode
1/13/14 9:07:59.000 AM kernel[0]: AppleUSBMultitouchDriver::_deviceSetReport - DeviceRequest for reportID 0xac returned with result 0xe000404f - retrying
1/13/14 9:07:59.000 AM kernel[0]: AppleUSBMultitouchDriver::_deviceSetReport - DeviceRequest for reportID 0xac returned with result 0xe000404f - retrying
1/13/14 9:07:59.000 AM kernel[0]: AppleUSBMultitouchDriver::_deviceSetReport - DeviceRequest returned error 0xe000404f (interface 1, reportID 0xac, payload 2
1/13/14 9:07:59.000 AM kernel[0]: AppleUSBMultitouchDebug: _deviceSetReport returned an error in configureDataMode
With Dell Wired Keyboard and Mouse:
1/13/14 9:54:26.000 AM kernel[0]: AppleUSBMultitouchDriver::_deviceSetReport - DeviceRequest for reportID 0xac returned with result 0xe0004051 - retrying
1/13/14 9:54:26.000 AM kernel[0]: AppleUSBMultitouchDriver::_deviceSetReport - DeviceRequest for reportID 0xac returned with result 0xe000404f - retrying
1/13/14 9:54:26.000 AM kernel[0]: AppleUSBMultitouchDriver::_deviceSetReport - DeviceRequest for reportID 0xac returned with result 0xe000404f - retrying
1/13/14 9:54:26.000 AM kernel[0]: AppleUSBMultitouchDriver::_deviceSetReport - DeviceRequest returned error 0xe000404f (interface 1, reportID 0xac, payload 2
1/13/14 9:54:26.000 AM kernel[0]: AppleUSBMultitouchDebug: _deviceSetReport returned an error in configureDataMode
1/13/14 9:54:26.000 AM kernel[0]: AppleUSBMultitouchDriver::_deviceSetReport - DeviceRequest for reportID 0xac returned with result 0xe000404f - retrying
1/13/14 9:54:26.000 AM kernel[0]: AppleUSBMultitouchDriver::_deviceSetReport - DeviceRequest for reportID 0xac returned with result 0xe000404f - retrying
1/13/14 9:54:26.000 AM kernel[0]: AppleUSBMultitouchDriver::_deviceSetReport - DeviceRequest returned error 0xe000404f (interface 1, reportID 0xac, payload 2
1/13/14 9:54:26.000 AM kernel[0]: AppleUSBMultitouchDebug: _deviceSetReport returned an error in configureDataMode
I Shut down VMware fusion completely and tried to connect and disconnect the USB Hub hundreds of times... worked with no issues. So Fusion seems to be the culprit. Not sure if Apple can do anything here... thoughts?
I will test with a different USB hub and post back if I find anything different. For now, it is a fusion issue.