Hmm the system should be able to consider it as "Generic Mouse".
I'm not sure, but have you tried any other LiveCD or the LiveCD+Mouse at another machine?
Well, it works with Sun xVM VirtualBox, but the issue using the virtual machine is performance (you can only do so much with an emulated machine w/ 512MB RAM and 128MB video memory; my real machine has 1.5GB RAM with 512MB video memory (NVIDIA GeForce 7300 GT)).