I'm typing this post in elinks on my debian install, so it might seem a little odd at times.
Anyway, I did some testing...
If I start with an init 3, with GPM functioning, the mouse works in the console.
If I start X with the device set to /dev/psaux, I get a mouse curser, but it's frozen in place, and I can't get a mouse curser back elsewhere unless I restart GPM twice (it hangs the first time, but when I start it the second time I get my mouse back. (in console, I have to quit X for this to happen)
If I try substituting /dev/psaux in my X config with either /dev/mouse or /dev/gpmdata, I get a very jumpy mouse curser that is all over the place (but seems to only move when i move my mouse).
It seems that my mouse does work, but trying to start X with the 'correct settings' causes it to screw up. I know these same settings don't break gpm or anything else.
Again, it's an el cheapo PS2 mouse with three buttons and a scroll wheel.
Any ideas?
EDIT: I have since then tested other protocools in my X configuration, such as plain old PS/2. Doesn't work either.