I think your imagination is pretty accurate here. Try using an essay item. You can capture and record each time they hit a particular key by using the k parameter. See:

www.empirisoft.com/medialab/help/queparameters.htm#key

To display the paragraph for them to type, you can adjust the location and size of the essay window using parameter values such as (t.5,h.4) and then display the target text as either an image or as html via the background option. See:

www.empirisoft.com/medialab/help/quebackground.htm

Let me know if you have any trouble with it!