The usb keyboard was attached through a usb kvm originally, but disconnected that and plugged in directly as soon as I started trying to diagnose the issue. The usb key been trying to install to and the usb cdrom/key install media have only been connected to the onboard usb ports.
The motherboard can boot from the usb key/cdrom install disks with no issues in either the USB2 or USB3 ports, its only when vmware takes over that usb stops working.