The Emulate3Button option introduces a small delay between pressing a button and actually delivering the button press event to the application. In the meantime motion events are delivered as normal, which means that if you click to drag something (e.g. window resize), the mouse cursor can sometimes have moved outside the click-sensitive area causing the drag to fail. It is not possible to fix the Emulate3Button functionality, it's basically how it works. Instead, I'd suggest that we no longer enable it by default, but let the user explicitly select it or just add it when the user selects a two-button mouse in system-config-mouse.
Whilst it's a fairly simple change in rhpl for the install a thought just occured to me. Do we want to have 3 button emulation on for laptops by default as I guess many laptops just have the two buttons with the touchpad.
Also Jeremy thinks we have a lot of two button mouse users out there still.
Speaking with Jeremy indicates that there is both a large number of legacy mouse users, plus new server hardware from vendors will ship with two button mice often.