FSM trouble

First you must use clock edge for your state transitions.

second, your second always is not driving outputs as you want.

Again it is better to have outputs registered or else you get latches, but anyway you should get the idea from pseudocode below

//pseudocode
always @(y_Q, plugged_in)
begin: state_outputs
    
        case (y_Q)   
             S5:    if (!plugged_in)
                              mouse_packet=1'b1;
              default:   
                  ps2_send_command = 1'b1;
                  ps2_command = 8'hF4;
                  mouse_packet = 1'b0;
        
    endcase
end 

here is the working FSM. I like this better as it is easier to see the output states along with the state priority in one shot.

reg [7:0] Rps2_command;

reg Rps2_send_command;

assign ps2_send_command = Rps2_send_command;

assign ps2_command = Rps2_command;

/*****************************************************************************

* Finite State Machine(s) *

*****************************************************************************/

// This FSM resets the PS/2 device and then keeps track of packets, which

// consist of three data bytes. Packets could be from a key board or mouse,

// but this code is needed only for tracking movements of the mouse.

always @(y_Q, was_sent, ps2_data_en, plugged_in, ack_received)

begin: state_table

case (y_Q)

S0:

begin

Rps2_send_command <= 1'b1;//S0 output values

Rps2_command <= 8'hF4;

mouse_packet <= 1'b0;

if

(was_sent==1'b1)//state priority 1

Y_D<=S1;

else

Y_D<=S0;//state priority 2

end

S1:

begin

Rps2_send_command <= 1'b0;//S1 output values

Rps2_command <= 8'hF4;

mouse_packet <= 1'b0;

if

(ack_received==1'b1)//state priority 1

Y_D= S2;

else

Y_D= S1;//state priority 2

end

S2:

begin

Rps2_send_command <= 1'b1;//S2 output values

Rps2_command <= 8'hF4;

mouse_packet <= 1'b0;

if

(ps2_data_en==1'b1)//state priority 1

Y_D= S3;

else

Y_D= S2;//state priority 2

end

S3:

begin

Rps2_send_command <= 1'b1;//S3 output values

Rps2_command <= 8'hF4;

mouse_packet <= 1'b0;

if

(plugged_in==1'b1)//state priority 1

Y_D= S0;

else if

(ps2_data_en==1'b0)//state priority 2

Y_D= S3;

else

Y_D= S4;//state priority 3 when plugged_in==0 and ps2_data_en==1

end

S4:

begin

Rps2_send_command <= 1'b1;//S4 output values

Rps2_command <= 8'hF4;

mouse_packet <= 1'b0;

if

(plugged_in==1'b1)//state priority 1

Y_D= S0;

else if

(ps2_data_en==1'b0)//state priority 2

Y_D= S4;

else

Y_D= S5;//state priority 3 when plugged_in==0 and ps2_data_en==1

end

S5:

begin

if

(!plugged_in)

mouse_packet=1'b1;//S5 output values

if (plugged_in==1'b1)//state priority 1

Y_D= S0;

else

Y_D= S4;//state priority 2

end

default: Y_D = 3'bxxx;

endcase

end // state_table

Looking back at your output assignments, something can't be right:

rps2_send_command <= 1'b1

rps2_command <= 8'hf4;

in four states and are undefined in s5 i.e. retains its value.

So you might just set these outside states.