I had a very similar problem when I upgraded my virtual machine to
Ubuntu 16.10.  My mouse and keyboard worked fine until I upgraded to
16.10.  The virtual machine would boot just fine, but I had no cursor
and no ability to click or type anything.  My mouse was being captured
by the VM, but not working at all.  Well I did realize I had the ability
to hold shift at boot to bring up the GRUB menu, so the virtual box was
working fine!  I figured the issue must be with Xorg.  I was able to
bring up a root shell and uninstall Xorg.  Apt was having issues
updating packages since it could not resolve name servers.  This somehow
caused Xorg to not come up at boot, which is when I also confirmed that
bash was also working fine.

TL;DR: Uninstalling and reinstalling Xorg has fixed my issue.

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https://bugs.launchpad.net/bugs/1630245

Title:
  after starting ubuntu 16.10 -- no keyboard, no mouse

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