Reformated and reinstalled Windows XP.
Removed and reinserted CMOS battery.
Replaced PS2 mouse with USB which worked fine.
I considered just using USB mouse and be done. But, I am not confident that this undiagnosed problem will not come back and bite me. The problem looks software related. Can any of you geeks think of anything else?
Incidently, I mistated my PC type. It is an Asus P4C800E-Delux vs. P4P800.