Ok,
I just put a keypad lock on my 8320 last night. I've had the phone for about a year with no issues. I entered the lock code after enabling this in security. I entered 4578 (which corresponds to SDZX). Now when the phone locks, all my password attempts are incorrect. In typing the required "blackberry" I found that the 'B' types 'b$' when pressed, this turns out also to be true for the '8' or 'x' button typing 'b$'.... well i'll be damned! on my last attempt, letters are back to reality. this b$ thing was happening for 'v' also. when i had keys in conjunction with the 8 button, i would get a small b with no $ or a certain key allowed it to be a capital J. Now it miraculously came back. I had done a battery and SD card pull prior to this, but it was still doing it. An email notification seemed to be the only thing that had changed since my last attempts (thanks to my registration email from blackberry forums!!!) odd odd odd. Well my issue seems to be resolved, but has anyone ever encountered this and no why it might have happened? I am going to remove the password never to be attempted again... hopefully.

No idea on your issue but unless you held Alt or enabled Num Lock you entered SDZX, not 4578. Passwords are text fields, not numeric. Just pointing this out because if you enable a password on your BB you'll need to enter it when you sync with a PC. If you had entered 4578 as the password on the PC it would have been incorrect.

yeah sdzx was the password, I just mentioned 4578 because that's how I was looking at it when I entered it. I didn't hold Alt or any other keys when establishing the password.
It was odd, once it was locked Nothing I did would allow me to enter the letter 'x' or 'v', even though 'v' wasn't part of my password i went through and discovered the "bad" letters on the pad. No letters were ever "bad" while using the blackberry during normal operation. When I held one "bad" key down and pressed another, it would not enter anything, if I held a normal key and pressed a bad key I would get a lowercase 'b' without the $ symbol. When I held 'Alt' with the 'x' button I got 'J', when I pressed Alt then typed x, I got 'B$'... anyways, don't know what resolved it, like I said an email notification arrived, that is the only distinguishable variable from when it didn't work til when it did.

I don't plan on risking it again with the key password... would a way around this be to hook the phone to desktop manager and access the phone, where I know I have no "bad" keys? I actually have installed Vista on a couple computers and wiped the hard drives, so currently I don't even have any blackberry installed...

@ Takeshi,
No idea on your issue but unless you held Alt or enabled Num Lock you entered SDZX, not 4578. Passwords are text fields, not numeric. Just pointing this out because if you enable a password on your BB you'll need to enter it when you sync with a PC. If you had entered 4578 as the password on the PC it would have been incorrect.

What if I pressed Alt during each button when setting up the password?

You would get the alternate character for that key. For example if your password was apple and you typed that while pressing the Alt key, you would actually be typing *@@"2