First things first, is the XP install cd the latest, that is does it come with SP2 or SP1a ?!? If only the latter then make sure you get and install SP2 first then go ahead and update the rest fo the driver packackes.
Then I would get the latest INF/Chipset software installation utility from Intel's website to make sure that the version that came with your motherboard isn't corrupted or has some kind of bug that is causing this issue with your mouse.
I've never had this issue myself, unless it's been a defective USB port and/or mouse

Also, if the motherboard BIOS settings are at their default then the onboard USB should be enabled and set for USB2 mode as well. However if you have any other USB device then you should try this out too just to make sure it's not some sort of compatibility issue with your USB mouse and that motherboard
