Function keys dead, constant dimming, pink goo

I have a boat load of problems right now with my MacBook

Model Identifier: MacBook2,1

Processor Name: Intel Core 2 Duo

Processor Speed: 2 GHz

Number Of Processors: 1

Total Number Of Cores: 2

L2 Cache: 4 MB

Memory: 1 GB

Bus Speed: 667 MHz

Boot ROM Version: MB21.00A5.B07

SMC Version (system): 1.13f3

My battery has been dead for a while and I've been running on AC power for a few months I only found out recently the battery doesn't need to be in when you run on AC power too. A few months ago I was online and my computer crashed real bad, all of a sudden the keys wouldn't work, then they would but they would not be typing the keys i was hitting. I went into the menu and hit restart and got a black screen, it wasn't turning on. I let it sit for a few hours and it got me to my login page but the keys were still acting crazy and it wouldn't accept my password. I decided to reinstall leopard that worked finally. But now my function keys don't work with the exception of F10, F11, F12.

Also page down page right \| /? don't work. That was when that popup window (are you sure you want to restart your computer) kept popping up and the screen would dim one bar each time and keep dimming if the popup was ignored until the screen is black. Fortunately if I get the screen in the right light I can get to my display preferences to bring the slider back up and see again. Its not a sleep thing, I've tried the whole function keys check box in system preferences, I've tried everything in system preferences. And when I would hold down the Fn key in the keyboard viewer numbers would replace the right side of the keyboard and the number 6 would have an x in a box when I let go it would go back to normal. And when my computer sleeps it shuts down.

Recently I used an external pc keyboard and all the buttons work fine on that f14 and f15 even adjusted the brightness. I did a hard drive test using my install CDs and everything was fine, I've reset just about everything even went out and got snow leopard, same problem though. The keys don't show up using terminal or any other application for the keyboard so I decided to clean my keys last week and took all the caps off. Under the 6, num lock 5 and F5 there is some pink-purpulish gelatinous substance, and under the bottom right enter key too. I have never had a spill since March 2007 when I bought this though. Also under a few of the keys on the left side it almost looks burnt but those keys work fine.

Now my optical drive is starting to go and only reads a few CD's and won't burn anything anymore. Being curious I looked into a kext file and it seems like everything could just be a power issue. I just want to know if I go out and pay 130 bucks for a new battery will I get my function keys and question mark back and relief from that popup window or is this just my computer slowly killing itself and gonna be much more expensive and time intensive overhaul?