After converting a VHD (or Virtual PC image) to VMware, you may experience mouse issues. This is caused by a conflict between the Microsoft virtual machine additions and the VMware tools. The way around this is to remove the Microsoft virtual machine additions prior to conversion. This is the preferred method, but if that is not an option, you can remove the Microsoft mouse driver from the mouse device class in the registry:
Browse to HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\Class\{4D36E96F-E325-11CE-BFC1-08002BE10318}Then remove the value msvmmouf from the UpperFilters Regvalue.
I then disable or remove the Virtual Machine Additions service and reboot.
To remove the Virtual Machine Additions:
Browse to HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\Services\ and delete the key named VPCMap. There are two other services 1-driver-vmsrv and 1-vmsrvc. I typically remove these servies too.