Uninstall all special mousesoftware (like Logitech and Microsoft have you install) and see if the native Windows 98 drivers suffice to have your mouse working as you want it. Then reinstall it (if necessary) and see what happens.
Did you already check in Device Manager if there are any problems associated with the mouse?
Any malware (virus, spyware) present on the machine could be the cause also. Do the usual scans (housecall and panda online scan, adaware, spybot).
Hope this helps.
My mouse will not work at all in regular windows. It's like it doesn't exist. Works fine in safe mode though. Checked connections and all's well. What the??? Please help.