Another hint....
Remember how I said it works 1 out of 10 times? Well, I can get it to work everytime if I go into the BIOS and change a setting in the BIOS. For example, if I go into the bios and change anything it works.
I went to Intels site and got the latest bios upgrade. Upgraded it successfully, and it still has the same issue of not working unless I go into the bios and make a change. Does this make sense to anyone?
Now that is really, really, weird.
Obviously, the board isn't initializing the PS2 port on a standard boot, but when you enter bios and change something, it's forcing it to revalidate everything and initializing the port. But why is this happening?
I *really* can't think of any reason why it might do that. It's not an OS issue, can't be, it has to be an issue with the motherboard. Perhaps even the chipset. I'm not sure what motherboard you have though, so I can't really do any research. Sadly, I don't think you're getting around this one.
It actually sounds slightly familiar, I had an Asus board that didn't like Razor mice, if I didn't click the mouse through the whole boot process, it wouldn't power it. The only remaining advice I have...
1. Tap a key through the whole boot process, see if it's powering down the Ps2 port on boot and an input stream forces it to keep it alive.
2. It's a real reach, and I think it's unlikely to work, but check and see if your motherboard manufacturer has drivers for the board itself. I really doubt this will solve the problem, but it's really the only other thing I can think of.
Edit:
WAIT! Idea!
Power management! Atoms are supposed to be lower power chips, so their motherboards should be designed to cut power to anything they can. One other thing I can think of, try disabling power management(ACPI I think it's still called?) in the bios and XP's power management features. It's within the realm of possibility that power management could be at fault.