Hold on there... If it was working before, don't update your BIOS. That's the most risky thing you can do to your motherboard. That's an absolute last resort. If this was working before, don't do that.
However, you do want to update your virus scanner and scan, it definitely might be a virus. Right click on My Computer. Go to Properties. Select the Device Manager tab. Any conflicts? Yellow, red signs? If so, post them back, along with connector type (serial, ps/2, usb). If it looks good...
Boot to safe mode. Go to Device Manager in safe mode. Expand the mouse section. Remove whatever's there. If there is software in add/remove programs, remove that now as well.
If the mouse is USB, disconnect it and reboot. Odds are, you have to install the software, shut down, then reconnect the mouse. If its not USB, then you shouldn't have to disconnect it, just reboot and see if windows detects it.
Matt J.