I also had a similar problem.  After booting up the daily-live, the USA
keyboard layout was chosen, and just as you described no arrow keys
worked.
They started working after I dug through the Keyboard settings and set
the keyboard model to something similar to what I have (in my case a
Dell PC-101)

I think it's reasonable to expect a working layout to be chosen by
default since people aren't likely going to go through the "type this
key, now type this key" wizard unless they have to.

-- 
Arrows keys disabled when enabling keyboard layouts
https://bugs.launchpad.net/bugs/256571
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