Keyloggers are inherently not illegal and not considered a virus (to my knowledge). So most antiviruses won't spot them (actually they'll spot something, but won't be able to identify it).
You are going to have to reformat it. I wouldn't rely on trying to clean it.
Most hardware keyloggers would be plugged into something (serial, parallel port, usb port, something). He'd have to rip the case open to put something internal on the machine, so if you don't see it, its probably not a hardware thing.
If you have proof of the phone tap.. thats a federal crime. BUt if he has $.... the lawyer will bypass most of the legal issues.
I am assuming you don't have a supercomputer with ya or mass resources...
Do this.
Bit image the hard drive (duplicate the entire hard drive as a image). Make a MD5 hash of it (so you preserve integrity). Basically back the entire thing up.
Secondly, install ethereal on it. Start logging ALL the traffic that passes in and out of the computer (ask her not to download or use it very often, just keep it on, check her email once and a while, type out something silly).
After a day or 2, analyze the ethereal logs. Look for suspicious packets and note down there IP. That should be the Server the Keylogger is communicating with (so you can track down the bastard that sold him the keylogger also).
If the server is US based... call the FBI cyber crime lab and see what they say. If its international... well they won't do too much due to international law.
If you are going to use this as evidence of a crime, DD the driver. Else just format the entire thing. Rename its workgroup, clear out the router table (make sure it is pointing to the correct DNS servers), call your isp and change your IP address if you have a static address. Change your email addresses (if you are not entrenched to that address, just pick a new one and change the password). If you have friends who need the email address, tell them not to use outlook express (cause if he has you keylogged, he's probably sent the damn thing to your friends too).
WHen you format the hard drive, make sure you format it ALL. Format the master boot record (some viruses live in there). Format hte slack space, wipe out the entire thing, delete the partitions, Hell if you can Zero the Drive.
Reload your computer Bios, and Reset the configuration of the Cmos.
FORMAT THE THUMB DRIVE.
.....
I am rambling on.
Tell her to buy a big dog, and a can of mase, and also release his name to the national enquirer and try to wreck his name (american media is all over the world).
Say he slept with a horse or something.
If you want to see if something is going to/from the computer, put a computer inbetween her's and the internet connection and Log all the traffic going in/out of it. You can also use Ethereal that I mentioned earlier. It will grab every single bit and log it, the type, its construction, what sent it, where it is going, how large, when, etc etc.