If you are looking for everything you asked for in one sed, I have this ...
sed -n '1h;2,$H;${g;s/\n//g;s/<----- key \(start\|stop\) ----->//g;p}' key.txt
But this is not very easy to read :) If you do not mind laying a couple of commands, you can use the grep, tr, sed, etc. sentences. in the rest of the answers you received.
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