I have a mouse man wheel USB, and Win ME hated it on PS/2 or USB. If I just use the default drivers it acts as a 2 button mouse and works. But wihtout the logictech drivers you can't tweak the PS/2 report rate or set up the 3rd button (well you can do the ps/2 rate with a 3rd party, but I prefer to use logitechs).
But surprise of surprises. My roommate's Intellimouse Explorer works fine with the full drivers.
WinME is s**t. Don't use it, stick to Win98SE or even better Win95B or C (it requires patches to make USB and AGP work, but it's still better than Win98).