When using the keyboard through the pass-through, with the I-PAC in USB mode, the I-PAC is working as a PS/2 to USB converter. This will work, but there will be some limitations, as there are with other "active" PS/2 to USB converters such as the Belkin. One of the issues is that in PS/2 mode the keyboard produces the auto-repeat but in USB mode the Windows driver does this, so there are two types of auto-repeat going on. Another issue is that some keyboards have poorly designed firmware (the Microsoft natural keyboard is an offender here) which sometimes miss the sending of key up-codes. This does not have a great effect on PS/2 but in USB mode any one single missing up-code will cause the Windows driver to go into auto-repeat mode. The belkin adaptor gets around this by issuing a spurious up-code after a pre-determined period of time (which is a good reason why it should never be used for gameplay!)
So, although it will work, there might be some issues owing to the different way in which PS/2 and USB work.
To answer the other point, if anyone has an I-PAC which does not keep it's settings (except the VE version) please email me as this is a fault which needs to be looked at.
Andy