Flybywyre
Without any details on the mobo, I am shooting in the dark here. There are some mobos that reversing the Mouse and Keyboard in the PS2 Slots solves the problem. (I know that sounds really strange but it does work on problems with some mobos, example K7N2G-ILSR and K7N2G-L.)
Have you tried with a USB Mouse?
The thing that does worry me is the fact that the mouse was getting sluggish and then started failing. It might be time for a fresh install of the OS, if you cannot get any mice to work.
Take Care,
Richard