That is exactly the same driver that I am using and I have played with the xf86config settings. It seems as though the sample rate is very low for some reason. I googled looking for sample rate issues and apparently if the 2.6.x kernel doesn't recognise the mouse it sets some crappy defaults for the sample rate. Adding this: psmouse_noext=1 to the kernel parameters in the loader was suggested. But I won't get a chance to try that until after work
Here is the link to where that solution was suggested for anyone who is interested
http://kerneltrap.org/node/view/1587 It includes a discussion between Linus Torvalds and Vojtech Pavlik about the problem and possible solutions.