I have a MS bluetooth wireless mouse that a friend gave to me because it never worked properly on his computer. It either would not work, or his system would hang up. His computer works flawlessly with the regular PS/2 keyboard and mouse, and nothing but problems with the bluetooth connected. The mouse would sometime work, then just stop working for no apparent reason. When his computer would freeze up, it was usually during booting, before the log-in screen.

He was going to throw it away, so I asked if I could try it on my PC, just for grins. From day one, I have never had any problems with it until the batteries get low. Then, I begin to have all sorts of strange things going on. Fresh batteries make it work fine again every time for me. Just for kicks, try putting in fresh batteries.

Bluetooth is a newer technology, and it's a little picky. The transmitter power requirements are such that a weak USB port may be causing your problem. If you are connecting the transmitter to a hub, try connecting it directly to the motherboard USB port. If you are already connected directly, try using a different USB port connectly directly to the motherboard. If your USB ports are not putting out full power, your bluetooth will never work correctly.

If the problem immediately goes away when you start your computer up without the bluetooth transmitter installed, then that is a good indication the problem is with the bluetooth set-up.

I found this article you might want to look at:
http://support.microsoft.com/default.aspx?scid=kb;en-us;815037&Product=winxp

If you don't have WindowsXP SP-1, you need to download the service pack before the bluetooth will work correctly.

If this doesn't help, try getting the keyboard and mouse swapped out on an RMA. There may be something wrong with your hardware.