I recently upgraded a vmware machine to xorg-x11-7.3. Previously I had been letting Xorg start without an xorg.conf which detected everything pretty much fine. However, I decided during the upgrade to start using the vmmouse driver. After getting a suitable config from Xorg -configure, I started using it.
The cursor showed up and move around the screen OK, but the fluxbox menu was always appearing in the bottom right corner, and moving the cursor over the entries seemed to have no effect. I then changed to twm, and discovered courtesy of mouse focus, that the mouse movements appear to only be registered in the topmost 3 or 4 pixels, and in the leftmost 3 or 4 pixels of the screen.
Having seen a similarly unusual top-left issue with linuxwacom under xorg-server-1.4, it suggested to me that this is probably some scaling issue.
I haven't yet had a chance to test this issue out on xorg-server-1.3, since trying to leave the X environment without using a mouse tends to require Ctrl+Alt+Backspace, which seems to cause vmware to crash and take the host X with it... 5:\
Anyway, I'd be happy to test out any patches or fixes you'd like, and if there's any more information I can provide please just let me know... 5:)
Same problem has been reported by Joerg Platte at http://bugs.debian.org/cgi-bin/bugreport.cgi?bug=442853
I'm seeing this same issue on Debian lenny/sid when running in VMWare Player. This issue recently appeared and I believe it was because they updated the xserver-xorg-input-vmmouse. All packages are up to date.
See the interim solution attached to #13552
*** This bug has been marked as a duplicate of bug 13552 ***