Internal keyboard and trackpad stop working after plugging in USB device
Yes, the culprit is the Android File Transfer application. And following the steps outlined here (disabling the annoying Android File Transfer Agent) seems to solve this. (No need to completely remove it, as it may be useful)

The underlying issue is logged with the developers as 58416: Android File Transfer - Mac 10.8.4 AppleUSBMultitouchDriver Keyboard Input Delays.