Do you have any other USB devices working on this computer when running Knoppix? Do you have a usb flash drive that you could plug in and confirm that the usb sub-system is working under Knoppix? Are you using any boot cheat codes that might impact the use of the usb mouse (like, oh, I don't know, .... nousb ?) Something very strange is going on here.

I really doubt that the mouse being blue is a factor here.