Huh, that's interesting... (had to dig it out of my junk parts bin) Same result here. Odd since my Logitech Trackman Marble returns the mouse-wheel properly.
But then, given the mighty mouse works both dimensions it's likely not using the same control interface as a normal wheel; which leads to the question: has anyone gotten all the mighty mouse functions working NATIVE in XP?
Because if it's not supported native on an XP machine, there's no way the VM's gonna do it.