It does not seem to be LED blinking issue (I am actually looking at the single byte sent to serial, communicating at 57600 baud)
It still does not work quite right for me, but there is quite a bit of difference between keypad and keypad2 libraries, keeping everything else in teh code the same. Using the Keypad, the first keypress always registers, but then 5-out-of-100 keypresses on the same key register; with Keypad2 library, after the first keypress that always seem to register, too, 85-out-of-100 keypresses on the same key register. With goToSleep() commented out, all the keypresses register, so it is not bad keyboard 
The above numbers came out of 500 keypresses... Just wanted to share before I take a look at the two keypad library codes.