In this tutorial I am going to explain and show the weird behavior (mouse tracking) of VMWare tools after they have been upgraded. I have seen this on VMWare Server guest machines and also on the VMWare Workstation 6. I don’t like to reinstall and create master images of different operating systems everyday so therefore I use templates These templates may have been created with older versions of VMWare server or Workstation. After the virtual machine has been brought up you will notice a warning that the VMWare tools are out of date. Couple times I did that and after the reboot the mouse did not work properly. The following steps will show what happened.
Right click VMWare guest and install VMWare tools
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Click yes
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Click next
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Click finish and reboot.
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After the reboot the VMWare Tools installed successfully is show on the left corner.
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CRTL-ALT-INSERT and login. Desktop is loaded and than I start using mouse; the screen above show what happened when I double clicked on the SCVMM Admin console.
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I found out that the VMWare Pointing Device is giving problems after the VMWare tools upgrade and my solution is to uninstall it.
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Click yes to reboot.
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After the reboot PS/2 Compatible mouse has been installed. Mouse is now working within the virtual guest machine. I found one article at VMWare describing similar problem.

Eric
This did the trick for me! Good explanation, thanx a lot.