EDIT: Shut the computer down. Switched from USB to PS2. Rebooted. Lost use of all extra buttons as the latest driver thinks it's a two button mouse now.
Now remove mouseware and all mouse drivers. Reboot.
Add standard "PS/2 compatible mouse" in device manager...or it may autodetect. Basically you want to get it back to how it was when you installed the OS.
Everything should work fine now. Let us know if it doesn't. I've never installed a mouse driver on this XP box (until today), and all I did was plug in the MX700 with the PS/2 adaptor and it worked great.
I'm not sure why they were ever even made that way. USB keyboards are REALLY silly. Then you can't ever get in your BIOS w/o plugging in a different keyboard! And at the cost of a free USB port too! I'm sure someday in the future all BIO's will support USB keyboards. Some might already. But until that happens...Whaa.. hm... so can anyone think of any good reason to consider using a USB mouse or keyboard ever again then?