TCS,
His mobo is the SiS 746FX Chipset. I do not believe that chipset supports Dual Channel Memory Mode. Now it is possible that an underpowered Power Supply could cause the issue though.
Flybywyre,
Switching from a PS2 Mouse to a USB Mouse will increase the refresh rate of the mouse from 40 times a second (PS2) to 120 times a second (USB). If you make a lot of mouse movements, you will really notice the difference.
I thought of another test for you. With Win98 make a bootable DOS Disk and load the mouse drivers on it. You could load a DOS based program like Ghost or a Memory Tester, or most BIOS Flash Utilities to see if you have the same mouse issues outside of Win98.
Take Care,
Richard