Highrez

I would like to have an option (or write a program that makes this possible) to change any selected text in any program from Cyrillic Alphabet to the Latin Alphabet on the fly (replace the text on the spot).

Is there any hope? I would apply as a beta-tested/developer

Sorry, I really don't think that is something for XMBC. For starters it has nothing to do with the mouse! Secondly, properly interacting with other application input fields requires a completely different sort of windows hooking and then there would be the "how to do that" question relating to the actual translation - its not the sort of thing you could just do in a web browser - it would require some sort of public (and free) API.

The best I can think of, would be to "copy" the text to a clipboard, run some other program that is able to translate the clipboard text and put the result back in the clipboard and then paste it back. Again, not really an XMBC thing but if you had a program that could to that clipboard manipulation, then maybe it would already be possible in XMBC using simulated keystrokes (Im guessing it might be problematic though because it wont be particularly quick).