I just wanted to add that I had the same problem out of a fresh install
of Ubuntu 8.10 desktop for x86_64.  I experienced the mouse problem
several minutes after running vmware.  My system has four displays, so
disabling xinerama is not an option for me.  I downgraded xorg just like
"Nelson" had suggested above.  The mouse worked for me all day without
fail.  I am running two nVidia NVS 285 video cards.  Thanks, Nelson, for
providing instructions to work around this very annoying, time killing
and productivity wasting bug.  I believe this bug is critical to those
of us that rely on xinerama.

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X.org will stop responding to mouse clicks on Ibex with Xinerama.  Occurs 
frequently, Fatal Error.
https://bugs.launchpad.net/bugs/296167
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