Ok, I spent 48 hours non stop in trying to solve the issue of keyboard (first bizarre lagging and then stopped) and touchpad (stopped all together at once after keyboard symptoms).
I found a solution that works. Be aware that the issue HAD NOTHING TO DO with drivers or hardware on my machine. I say this beacause, looking at previous suggestions, I have tried fiddling around with hardware and devices, uninstalling drivers and reinstalling
them. No luck.
What did work was to save all my important data on external HDD (I did this by using an external USB mouse) and then re-iniatialize Windows 10 Home on my Lenovo bB590 laptop.
Go to Settings->Update&recovery->Recovery->Reset this PC. I chose not to keep my files (already copied them earlier on external HDD).
Then I went through all the numerous options and choices that Windows asks you to deal with after reset. Now keyboard and mouse/touch pad are fully and correctly functioning.
This said, I hope someone suggest an easier and less time consuming solution. Hope it helps!