Expression of type T cannot be handled by a pattern of type X

C# 7.1 supports this now. For example, see "Pattern Matching with Generics" in this article. You may need to add <LangVersion>7.1</LangVersion> or <LangVersion>latest</LangVersion> to your project file. See here for details on configuring LangVersion.

The answer to C#7.0 is

if ((Packet)packet is KeepalivePacket keepalive)
{
    // Do stuff with keepalive
}

switch ((Packet)packet)
{
    case KeepalivePacket keepalivePacket:
        // Do stuff with keepalivePacket
        break;
}

As explained by Neal Gafter from Microsoft:

The reason it doesn’t work is that there is no conversion (explicit or implicit) defined from T to KeepalivePacket. Pattern matching requires such a conversion to exist, as it is defined in terms of the cast operator, which requires a conversion exist. The language specification and compiler agree that no conversion exists. It seems strange to me that the language specification is defined such that no (explicit) conversion exists here. We'll look at what we can do about that.

We're not going to do anything about this in C# 7. You'll have to add a cast to your code to work around it. Once we have recursive patterns, this may be more difficult to work around. Moreover, the awkward language rule that underlies this issue (i.e. that there is no conversion from T to KeepalivePacket) doesn't make a lot of sense.

Update

This is now working in C# 7.1