I’ve spent very minimal amount of time diagnosing. I compiled a vanilla kernel, as well as my own version of the default kernel, and no go.
It wasn’t the KVM. It may be the USB->PS/2 adapter though, as the mouse works fine plugged into the USB port. My mouse is a Logitech Mouse. But again, I’ve never seen anything like this on any other Linux distro.
I have a new KVM on order, which is USB/DVI/AUDIO, so hopefully there won’t be any problems with it. I am now trying out openSUSE with the mouse connected to the USB port.
So far, I’m not sure what openSUSE has to offer, as I’ve never used KDE4, so I’m not sure what comes with it, and what comes with openSUSE.