Digging around on Apple's support site I found out (in article 42937) that you need to disable mouse keys in the Universal Access system preferences. Apple's document reads like it's for the full sized keyboards that ship with the desktops, but it worked for my USB peripheral too.
[robg adds: If you do much gaming on your machine, you'll probably want to heed Apple's advice to disable the "Allow Universal Access shortcuts" option as well.]

