VMWare 4 and Redhat 9 mouse problem

I am having a mouse problem with VMWare workstation 4 and Redhat 9.
When using VMWare I can't get my mouse to move the cursor inside the linux x teminal/x server (after startx).
(the mouse cursor stays frozen in the middle of the linux virtual machine screen within VMWare)
I CAN get the mouse to move the cursor inside a console/shell window (wheelmouse PS/2)

I have tried:
Googling for newsgroup posts
No external mouse, use the built in touchpad only
External USB mouse
Various settings in #mouseconfig
No Joy

Here is my configuration summary:
VMWare Workstation 4
Host: Windows 2000
Guest: Redhat 9, Linux kernel 2.4.20-8
Computer: Toshiba Satellite 5105-S501

VMware is working great except for the mouse won't move
It's certainly better than trying to get native linux drivers working on a newer laptop.

I am wondering what I'm doing wrong with the mouse config...