not sure why but i have an optical (microsoft)wheelmouse, recently did a clean install of xp, and every so often the redlight goes off on the mouse and the cursor won't move, it is a usb mouse plugged into a 4way usb extension, all pushed in properly and drivers are fine,if i unplug the mouse and then plug back in it starts to work again (if it wants to!) its doin me 'ead in!!!
Try plugging it into a usb port on the computer and see if you have the same problem. This will at least narrow down the problem to either the mouse or the usb hub.