Malenko - yes I've tried that. I'd put it all into a new/fresh dire with mame, no ini (-cc to create default), cfg all deleted etc. and just one rom (1942) in the rom folder and deleted the nvram and samples too. It didn't work any better but I have found out a little more tonight.
[It is actually on a fresh install of Windows (XP) too as I am trying to get it running as well as possible on limited hardware (well, hoping to!)]
I've established tonight the problem is not the keyboard though. It seemed that way as it was full screen and no keys were working, inc Ctrl-Alt-Del etc so I couldn't even get to task manager etc etc. It then needed switch on/off to get anywhere. However, I've worked out how to run in windowed mode under WINDOW VIDEO OPTIONS and I can see a little more what is going on. In fact, in windowed mode it runs no problems which also helped work out where the problem might lie.
But in "window=1 and maximise=1) it doesn't work (just as the original window=0,maximise=1 was doing). It seems to me the video is freezing at full screen/near full screen sizes but is okay in a window (at the actual game resolution I assume)
hlsl is off (0). The graphics are on-board Intel only. It is to a 1600x1200 monitor so I wonder if that is stuggling in some way and crashes/freezes mame? video is d3d. Should it be a less-intense setting (I only want to play the old classics like 1942 on it - I realise its not a beefy enough machine for a lot of stuff). What other settings are there for "video" ddraw? Any others?