Can the 2nd MCU on the UNO R3 be used for keyboard emulation? Following on from What&#39;s the 2nd ICSP header for in Arduino Uno R3? I was wondering how this could be hacked to our advantage. 

For example, could that firmware be rewritten to have the UNO recognised as a mouse/keyboard input? Could this be done after the boot loader process and leave the uploading process in tact?

Given the limited IO, it seems it's functions might be limited. Plus I have no idea how much code is space is available.
Yes, it is possible. using LUFA, you can burn new firmware to the Serial converter. The only problem is that you need to re-burn the USB-Serial converter to upload another program.

Info: http://www.fourwalledcubicle.com/LUFA.php

Specific page: http://mitchtech.net/arduino-usb-hid-keyboard/