I figured out the problem so I thought I would share the solution. I ended up reinstalling windows xp. Things worked fine and then after 2 days it started doing it again. Used a system restore and the problem stopped. I started using quicken 2005 and printed out a document and it started doing it again.
My printer (Brother HL1440) will only print out quicken reports if the printer properties is set to "Print directly to printer" in the advanced settings. Well sure enough, as soon as this option is selected the mouse starts misbehaving. The problem goes away when the printer options is set back to "spool print documents...".
Hope this may help someone in the future.
Greg