Keyloggers are relatively innocuous in the grand scheme of things in that all they'll do is report what you're doing, divulging passwords, sites visited, etc.
The real problem comes from Trojan Horses such as Subseven or BackOrifice which not only have keyloggers built in, but offer the bad guys an entire suite of tools to remotely install software on your PC, run command line instructions, set up proxies...basically do anything on your PC as though they were actually sitting at it, including reboot it. And you would be none the wiser, unless the bad guy were stupid enough to bog down the system with tasks so badly that you actually noticed the PC's performance go down the tubes, even though it appears to you that you're not doing very much with the PC. When the bad guys set up a hidden torrent client on your PC, and then start downloading questionable content using it - it'll be your door that the police knock on, because it will actually be your computer visible to the internet - while the bad guy uses a FTP server built into the Trojan Horse to transfer the content from your PC to his own - with no record left of the transfer. If the bad guy gets a chance to use your computer for a while, and then dump the malware from your PC to cover his tracks, it'll be you left holding the bag. Even if you don't get malware on your PC, but leave your wireless network at anything lower than the highest security level you can manage, you can end up with scenarios
like this happening.
When I said "ghost" of the software installed on the hard drive, I was referring to the fact that even if you overwrite the hard disk space used by a program after it's deleted, a forensic examiner could have a reasonably good chance at retrieving what was there previously. The more it's overwritten, the less likely the chance that evidence can be recovered.
In answer to your question, no, unless there's a keylogger installed, individual keystrokes aren't recorded anywhere - unless you're talking about things like internet search history, form entries, etc. - as the Shafia father, mother and son found out during the recent trial in Kingston.
In summation, you're a lot better off spending an hour of your week ensuring your computer/network are as secure as can be (by running virus/malware scans, changing WAP passwords, etc.), than to have to rely on a herculean effort to prove that someone else gained access to your PC/network for nefarious purposes.