Doctor John, one very basic reason for different keys, as mentioned previously, is to accomodate vocalists. Voices don't retune. Not only can two different singers need to do a given song in different keys, but a given singer can't sing every song in the same key (always C, for instance). It depends on the singer's vocal range and the particular song's range.

As to this: And why difficult keys like E flat? It can't be (as I have seen written) that certain keys are easier on some instruments; for example E is easier on the guitar than F; just retune the instrument!
Oh yes it can! E flat may be a bear on a guitar, but I suspect its not difficult on an E flat horn--although C might be. And horns don't retune, either. I'm sorry to have to say that the use of different keys indeed CAN be, and often IS at least partly, because certain keys are easier on some instruments. It can also depend on the particular song and its chord sequence. Some songs that are easy for me in G or C would be a major pain in A or E, and vice versa, depending on which direction in the cycle of fifths most of the chords come from.

I can't buy the notion that different keys have different characters. (Sorry Barbara, but I know several songs that I happen to do in D that are anything but bright and cheery.) Now I could accept there being some difference in the sound of song done on the guitar between, say, C and D, in that the particular inversions of the chords used will be different. But "a completely different sound, different feel, different reaction" strikes me as a stretch. I would wager that if the same song were done in the same style on a piano in both D and E flat, by someone proficient in both of those keys, that the only difference anyone could tell was that one rendition was slightly higher-pitched than the other.

Jon, although a full understanding of scales can get highly technical, I find it useful and essentially accurate to view the chromatic scale as having a consistent a PERCENTAGE increase from note to adjacent note (half step). For example, the space between guitar frets can be seen to get X% wider with each step up the neck.