== Update from Steven ==
I just noticed that the USB keyboard did not work when plugged into the iMac, BUT the mouse did. I took the Apple keyboard to my laptop and plugged it in and it works perfectly. All I did was install a new processor. I hope this new symptom helps diagnosis.
== Update 2 ==
I took the iMac apart today and put back the old T2500 chip. It worked again. Since I found some GeekBench results for a T7600 on a iMac 4,1, I am assuming I can swap the T2500 for a T7600, therefore, the processor must be bad. I returned it today.