hello
Got some news. I've successfully tried the procedure on parallels as well.
Instead of updating the sync driver(s) to standard PS/2 mouse, I had to update it to the HID compliant mouse (Not HID compliant device)
This seems to work!
Again, all this will keep the 'smartmouse' function enabled. The only side affect again is that the mouse still feels sluggish. And there might be some milliseconds of weirdness when dragging the mouse from the host over the guest window, but I've only observed this in Vmware fusion.
I hope that both vmware and parallels implements a new mouse handling feature or fixes this long-term problem because this obviously doesnt work for many people.
There is an extra smartmouse option besides on or off, auto. But this only applies to fullscreen applications (mainly) and not other 3D applications or CAD programs where you need to navigate the 3D image with your mouse. And this is the most common problem all these years.
Im currently using Valve Hammer editor which requires that you move in the 3D view with your mouse. This is no permanent solution but it does work.
Last edited: Nov 12, 2010