Yup - something must have been amiss with Security Update KB4074588 (OS Build 16299.248) or its install. First time I've think ever had a real problem with my Surface Book that I've traced back to a security update.
There is more info in the Windows forum at Recent update causing USB mouse/keyboards to stop working
To uninstall the update. Open Control Panel > Program and Features > View installed updates. Tap and hold the update list, then select Uninstall.
To prevent receiving the update again. Open Settings > Update & Security > Windows Update > Advanced options. Set Pause Update to On.
Update 3/5: There is now a fix - March 5, 2018—KB4090913 (OS Build 16299.251)
- Addresses an issue in which some USB devices and onboard devices, such as a built-in laptop camera, keyboard, or mouse, stop working. This may occur when the Windows Update servicing stack incorrectly skips installing the newer version of some critical drivers in the cumulative update and uninstalls the currently active drivers during maintenance.