When you have a few minutes, go to www.xfree86.org
and read their FAQ's. The answers to your questions are there (and a lot more). Their FAQs are pleasantly readable and helpful. In the meantime, your mouse question will be a bit hard to find on their site but its there too:
For a PS/2 mouse, open /etc/X11/XF86Config-4 and find the stanza about the configured mouse. Change the line that says
Option "Protocol" "PS/2"
#or whatever, to:
Option "Protocol" "ImPS/2"
#Watch the case on the letters.
Then add this line:
Option "ZaxisMapping" "4 5"
#this adds the '4th' and '5th' 'buttons' required for the scrolling to work.
Farther down in the file, you'll come across a stanza about your screen and its defaults. There'll be a line about DefaultColorDepth. Whatever line below it corresponds to that color depth will have your resolutions listed in the order that the X Server will try. Change the order they are lined up in. For example:
"1024x768" "800x600" "640x480"
then it'll poll for 1024 first. If its supported by your vid card/monitor, it'll stop there. If not, it'll try the next lowest listed. And, honestly, if you have a garbled screen with some resolution change, then its not supported by your monitor. Take that part out of the line.
If you want to use 1280x1024, then put it first on that line and the X server will try that resolution first. Good luck. Read the docs, though, as there's good stuff in there about enabling 3d acceleration, fonts, etc.