I see something quite similar to this, however for me it only occurs when "Slow 
keys" is enabled.  Here are my symptoms:

Keyboard Preferences | General | Repeat keys [checked]
Keyboard Preferences | Accessibility | Slow keys [checked]

Arrow keys no longer auto-repeat.

Disable "Slow keys" and they work again.

Can you try fiddling with these settings and see if we see the same
effects?

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Keyboard repeat delay does not apply to all keys equally
https://bugs.launchpad.net/bugs/293275
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