The solution is very simple. Uninstal the intellipoint software and revert to the basic HID compliant mouse driver that comes with Windows 2K. Intellimouse, as near as I can tell, does not work well on any computer running Windows 2000 professional. The base driver works well with optical wheel mice such as the Intellimouse Explorer 3.0A USB.
Microsoft, for their part, recommends that you buy a new mouse.
I prefer my solution.