When Gutsy is installed inside a VMware virtual environment, the mouse device gets assigned the standard "mouse" driver which causes. Even with the latest release of VMware Workstation (6.0.2 at the time of this writing), the vmware tools installer does not correctly install the 'vmmouse' driver and configure the Gutsy guest to use it.
Fortunately, Ubuntu packages a vmmouse driver in its repository, which can be installed using a standard apt-get command:
% sudo apt-get install xserver-xorg-input-vmmouse
After this package is installed, the driver must be configured in the X configuration file: /etc/X11/xorg.conf. Look for the section that looks like:
Section "InputDevice"
Driver "mouse"
... other options ...
EndSection
and change the Driver value from mouse to vmmouse so that it appears as follows:
Section "InputDevice"
Driver "vmmouse"
... other options ...
EndSection
Finally, the the X server needs to be restarted to reflect the configuration change. This can usually be accomplished by logging out of your X session.