I confirm that I have the same problem. My virtual Edgy install worked
OK, but I upgraded to Feisty via the Update Manager and now the mouse
does not work.

The Virtual PC software does not appear to 'capture' the mouse pointer
when you click on the virtual machine. Normally the windows pointer
disappears and the virtual machine pointer starts to move (but is
trapped inside the virtual machine). You must release the pointer by
pressing a magic key. It seems it is the capture process that is not
working which suggests to me that the Virtual PC software does not think
that the host machine has mouse support.

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Virtual PC and feisty fawn
https://bugs.launchpad.net/bugs/87262
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