I don't think that it's necessary to reinstall Windows.
It sounds more like a device driver conflict, possibly triggered when your keyboard drivers were updated.
If you've still got your old USB keyboard, uninstall the wireless keyboard and see if IL2 works properly using the USB keyboard. At least you'll be able to determine if it's IL2 being weird in general, or just responding strangely to your wireless keyboard.
Next:
First, clean the registry using the registry cleaner of your choice.
Second, make sure that Win 7 is updated with the latest updates.
Third, make sure you've got the latest drivers for your keyboard.
Fourth, make sure that you've installed all the patches for IL2 (up to patch 4.12 - there have been loads of updates and changes since the 4.07 patch).
If all that doesn't work, uninstall the drivers for the keyboard and try installing older drivers for it (e.g., the drivers on the CD that came with the keyboard).
As a long shot, in IL2 Setup, click on the Joystick tab and then Advanced, Make sure that your joystick is actually your preferred control device. It's just possible that IL2 thinks that the keyboard is your "joystick".
Finally, although you might not like to hear it, it might just be simpler, faster and cheaper (in terms of time) to go back to using an ordinary keyboard when playing IL2.
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