Have you tried using the external CD/DVD player the system came with with the recovery DVD?
I think your only solution here is to plug in a USB keyboard and then depending on what happens when you try using the keyboard you may also need to disconnect the internal keyboard ribbon cable.
These early Mac air systems make things hard as they only have one USB port. If you can't get it to boot up with the internal HD.
If your OS is corrupted you'll need to find a way to access the HD. If you can get the USB keyboard working and have a second Mac you could try putting the Air into target mode and via WiFi see if you can access the airs HD to recover any files you may need and then repair/rebuild the HD.