i didn't need it, but give it a go if you like. Also, have you tried adding Option "Buttons" "5" ? Also, there might be more than one config file, check in the log this is the config file being used (just trying to be thorough)

Ok I have IMwheel installed, tried Options "buttons" "5", ran ls -1 /dev/mouse and it said:
in yellow writing

and am tryin the remove emulate thing, but if it helps when Im in Mozilla and click the middle button it causes the browser to go back one.

I tried removin the emulate3button option but that didnt work

sorry, i should have been a little clearer. The reason i gave the output of ls -l /dev/mouse was to show that on my box this was a link to /dev/psaux , the port where my mouse is plugged in. I assume yours is too, and i've never heard of /dev/input/mice (though, on checking, it appears i have one too.) Try changing the the line to:
in your XFree86Config file to access the mouse directly there. Maybe its losing some functionality by going through /dev/input/mice. I dunno, if it works, its weird it doesn't fully work, but its worth trying. Remember to restart X after changing the config file.
Can anyone tell me anything about the /dev/input directory? I'm not using it for anything, maybe i should be.

could it be that I have a PS/2 to USB converter on it?

the Option device "/dev/psaux" didnt work but it was ready in the first mouse entry ne way. should I be changin the first or second mouse entry?

It's not the converter. I have one as well.
You have two mice set up in XF86Config, now you're talking. I think you should find the entry with psaux and adjust that one ( you might even want to comment out the other one, insert # in front of each line and X will ignore it, without it being lost from the file). Then you need to tell XF86 to use the correct mouse entry. Find the line InputDevice "whatever" "CorePointer" and replace "whatever" with the identifer of the correct mouse. (don't forget the quotes). Restart X, and tell us what happens.

what if the "whatever" was right?

you mean its already pointing at the ps2 one? In that case the section of the XF86Config you gave us earlier was from the wrong entry (that was the one pointing to /dev/input/mice). What does the entire psaux section say? By that i mean the section beginning Identifier "whatever" where whatever is the core pointer. This whatever thing is really getting stretched

herre is the mouses sections:
And the whatever was pointing to mouse0

Ok, and this is my final answer, cos i'm out of my ideas, but there do seem to be problems with that config that i think can be fixed.
In the mouse0 section (leave the other commented out)
change Protocol from ps/2 to IMPS/2 and add Option "buttons" "5" . I think you can leave emulate buttons though its redundant.
That will give you a config like mine which works with the same mouse on the same distro. Best of luck, they're my last cards.

Thank You!!!!!!!!!!!!!!!!!!!!! That worked!!!

whew.. that's a relief.. glad i could help.