Does iterative hashing of mouse/keyboard input improve its properties as an entropy source?
The biggest problem with capturing mouse &amp; keyboard input is that the number of likely things a user does within a small timeframe is limited.

Imagine that you hash 3 alphanumeric characters of userinput H(X1 + X2 + X3) (assuming + means concatenation and H is a cryptographic hashing function). The number of possibilities from 000 to ZZZ would be about 62^3. Now if instead you would use H(X3 + H(X2 + H(X1))) the number of possibilities would still be 62^3. You could even use something like pbkdf2 with a ridiculous number of iterations without changing the number of possible outputs.