Just as a data point for you: I tested keyboard BIOS v1.4 on Pico 1 (with filesystem) and had a glitchy REPL prompt (screen flickering, no keyboard input). The breaking change to ports like micropython was mentioned here, if you want to track it.
By flashing keyboard BIOS v1.2, I was able to use the REPL normally. Was not able to utilize the edit() tool, as I experienced the freezing behavior mentioned previously in this thread.
Thanks for your hard work, Laika!