If the mouse acts weird then all you need to change is the protocol from ImPS/2 to PS/2 or whatever is appropriate. Changing the device doen't appear to be necessary as your mouse signals are received but not properly interpreted.
If you are using some optical mouse, like I do those changes may not help. Then what you have to do is upgrade from Xfree86 4.2.* to 4.3.*. For a long time I had the problems with my mouse on both RedHat 8.0 and then when I installed debian sarge. I noted that on installing Mandrake 9.1 and booting Knoppix I didn't have the same problems so I realized taht what these two distro's were using the later version of xfree.
To upgrade xfree on debian add the following line to the file /etc/apt/sources.list
deb
http://debian.netfarm.it/experimental/ woody sherpya
run the command 'apt-get update' and then 'apt-get install x-window-system'
I believe that should work.
Good luck