@damig: Try something for me if you would.
Boot your CD (please note which VERSION you're booting, 4.x, 5.x or 6.x)
When you reach your "X" in the middle of the screen, press
CTRL+ALT+BACKSPACE to shut down the desktop (X server)
If successful, you should be at the command prompt. (This tells me the keyboard is working, at very least.)
Next, type in the following line:
tce-load -wi Xlibs flwm_topsideIf I'm guessing correctly, these should both already be installed. If you see a progress bar for either, please note here which.
Finally, launch
setupx so we can manually select the screen resolution and mouse settings.
Set your screen to 800x600x24 (initially) and 2-button mouse (usb/ps2)
Once done, launch
startx and reply here as to what you find.
If you have a desktop (and icons, etc.) doing this manually, reboot the machine with the CD.
Once back at your "X" in the middle screen, move the mouse around for a few seconds. Does the "X" move?
Next, shut down X like you did above and then run the following:
cat /etc/sysconfig/desktop(post the results here)
The "X" on the screen is telling me you don't seem to have a Window Manager running; which if you're booting from an ISO you burned, this shouldn't be the case. It sounds to me as though you might have better luck running an older version of TC if you're not already doing so. Go to the repository and nab a copy of CorePlus-current.iso (link below) and burn this to CD. This should give you the greatest flexibility with the least number of challenges.
http://tinycorelinux.net/4.x/x86/release/Once burned, boot the machine with this CD and select the first item on the boot menu (which should boot your machine with Xvesa and the flwm "topside" window manager, Xprogs (a few basic configuration tools) along with the Wbar icon manager for the bottom of the screen. If successful, you should be on your desktop in a matter of seconds and have little if anything needing to be done.
If you're planning to "install" TC onto the machine, this CD also has the necessary tools to do so (the "grey circle" icon to the far right is tc-install)
If you need things such as a browser, email, chat, office, etc. this is where Apps will come in handy, but being a Live-CD environment this will only last for as long as the machine stays powered on (and not rebooted.)
Hope this helps - please report back your findings!