I got everything working properly now: mouse, internet, and screen.
Somewhere in the VMware help it says that you must select a specific type of mouse from the list in the rh8 setup (i think it's the default suggested mouse). Look in the help files for VMware... they are very complete, just hard to find the information bcuz there is so much of it. I ended up reinstalling RH8 to do this and the mouse then worked.
I have a ms optical mouse... it's usb but i using the ps/2 connector. Don't forget to also install the VMware tools. This is what gets everything working properly.
Hope that helps.
The only thing i couldn't do was share a folder between rh8 and win2k. I stopped trying