Ok confirmed two things.
1) -nozap does block CTRL-ALT-DEL on its own.
2) Mizalf's solution also works perfectly.
Honestly I think I like Mizalf's solution better since my project is related to adding onto the DOSBox environment and a CTRL-ALT-DEL reboot is realistic.
About Blocking Mouse Input-
Xorg-7.7-bin.tcz - Stupid question, but do I have to be running Xorg instead of Xvesa to have Xinput work correctly?
I probably should try Xorg just to see if DosBox benefits from the 2D hardware acceleration, but I was under the impression Xvesa has better compatibility and the reduced size footprint is nice.
I tried just loading the tcz, running tce-load -i Xorg-7.7-bin.tcz twice confirms its loaded but I still get the same terminal response - X Input extension not available.