This is a small bug which can make LAPTOP owners very unhappy. PS/2 touchpad does not emulate a standard PS/2 mouse well enough. Cursor is very jumpy. By adding only 2 lines of code, PS/2 mouse starts to behave. Please check my URL. Thanks Igor
I can verify this bug report, on a Compaq Armada M700. However, it's not quite right; the built-in mouse works if you configure it as "Microsoft Intellimouse (PS/2)" in mouseconfig (imps/2). So, not really a bug, just annoying (well, to me at least, since the mouse I have attached to the dock works only as "Generic 3-Button Mouse (PS/2)" (ps/2). ;-P)
Newer RH knows about selecting and sometimes detecting the weirder PS/2 mice that should have solved this. Alan the bugzilla womble