Have seen this problem as well on the Belkin KVMs.
I came across this item on another list. Have not tried it myself but it sounds like it fixed a few peoples problems with this.
http://www.redhat.com/archives/fedora-test-list/2004-February/msg00739.html
They say to put psmouse.proto=bare on the kernel command line or proto=bare on the psmouse module command line.
There was some discussion of two other options imps and exps. exps apparently causes the mouse jumping problem. imps appears to get a mouse with a wheel working as expected.
Again I have not tried this but this may be an actual fix to this
problem.