if you're talking about the built-in virtual keyboard - yes - it is *broken*
i noticed this as well. you try to type, and it steals focus, and nothing is enetered when it comes to your text.
best bet with this build of dsl, get a USB keyboard, and make a USB/xbox adapter, which is very simple to do. the older versions of dsl have a great virtual keyboard. i dont know why this one sucks so bad.
linux is a neat system once you have it going. i am using it to download video/audio files directly to my box. i then transfer them to my xbox partitions to run them thru XBMC. im still working on getting torrents to download *directly* into my xbox partitions. its really the only reason to use linux on the box, in my opinion.
i do like the dillo browser, its very fast, but not good for logging into gmail. firefox is great on it tho. opera works well, too. stay away from loading flash into it, because the box is limited to 64megs of ram. keep it simple. thats just a personal tip.
as far as unpacking/unzipping files goes, this will take some getting used to. the method i use is:
enter emelfn as root user, browse to where your packages are downloaded to, which is usually dsl/home/ from here, you can right click (click with button "B"). select the option 'operations' i believe it is, from there it will give an unpack option.i am not on my box right now, so this might be slightly off. if it is, i will check it out, and actually reply from linux on my xbox. right now, the boy is playing halo 2 on it.
p.s.
on this .package stuff, i dont know if you're tralking about archives (zip, etc) or what. i am referring to unpacking archive files.