So I've "solved" this one on my own, in a manner I'd call "super hacky".
The problem appears to crop up when defining a custom keyset, trying to have that set load upon startup, and also setting MALA to launch upon startup. Remember, the KeyWiz doesn't save ANYTHING back to hardware, so it's using software "trickery" to recall these custom settings.
From my email discussions with Randy:
As the software works once the system "calms down", it's pointing very
strongly to a piece of software that is altering something in the system
while the Uploader is trying to do it's thing.
That software is apparently MALA.
What does this mean? Well, I was told that I was trying to use the software for something it was never intended to do. Hmmmm...

At any rate, Randy suggested a solution of:
A shortcut can be made to run the uploader in stealth mode and then launch your front end. But as
I said before, if MAME is your thing, then the software is really unnecessary. Most use the KeyWiz with never an issue and never a need to use the software.
So I:
1. disabled the option for MALA to launch upon startup from Mala's GUI.
2. Edited my custom defined set "A" to launch a .BAT file which I made, to start all other NORMAL WINDOWS STARTUP PROCCESS (yeah.. all of em. this is stupid as all get out)
3. When the keywiz "calms down" and finally uploads my custom set (and it now does because nothing loads BUT keywiz on startup), it calls that .bat file
4. The .bat file
a. ensures my windows environment is set to horizonal layout using free iRotate.exe (google it)
b. launches MALA using the dos command "cmd /WAIT", so that when I exit MALA, all my other normal processes I'd be loading normally via windows get loaded after I'm done my gaming session. These currently include, iRotate.exe (permanently instead of a one time call) and a windowed keyboard app which allows me to administer using trackball and mouse buttons instead of pulling out a physical keyboard.
c. whatever else you expect windows to normally load in your "startup" folder.
Does this solution work? Yes. Is this solution ghetto? I'd say yes.
Who's fault is it? Is it Randy's software implementation of hardware eeprom? How about MALA for being a hog about whatever trigger is needed for the keywiz to think upload the software? Have you tried rolling around your mouse while the keywiz is uploading yet? LOL... that freeks out windows and makes you require a reboot of your machine. This, and being told I'm using the software for things it wasn't intended to do make me say the fault is YOURS. Why?
You bought the keywiz instead of an ipac, and expected it to save settings and reapply them via software which works out of the box, with what should be considered a standard MAME setup implementation.
I'd love to hear how any other member's experience defining a custom keyset and integrating it with their frontend went. I find it hard to believe that what's described in this thread is by any means "advanced" and out of the scope of this product.
-csa