I've run Keyclone with 2 WoW instances on one machine and one each on two machines and only had that problem occur once. It was solved by a quick reboot of both systems.

Specifically what happened was I had been mashing my casting keys as fast as I could because I was distracted and not watching my cast bars - my first conclusion was that I must have been broadcasting too many keys too quickly between the two instances of WoW, however I tested the same speed-mashing after the restart and it worked fine. Are you connecting wirelessly? Have you tried cabling in to see if it has any impact? How about exiting keyclone while both instances of WoW are running - does that drop your latency?