This works for me- hopefully it does for you. I can use both the eraser head mouse and a USB mouse simutaneously with this file. My font's look nice too. :P

Section "ServerLayout"
Identifier "XFree86 Configured"
Screen 0 "Screen0" 0 0
InputDevice "Keyboard0" "CoreKeyboard"
InputDevice "PS/2 Mouse" "CorePointer"
# Serial Mouse not detected
InputDevice "USB Mouse" "CorePointer"
EndSection

Section "ServerFlags"
Option "AllowMouseOpenFail" "true"
EndSection

Section "Files"
RgbPath "/usr/X11R6/lib/X11/rgb"
ModulePath "/usr/X11R6/lib/modules"
FontPath "/usr/X11R6/lib/X11/fonts/misc:unscaled"
FontPath "/usr/X11R6/lib/X11/fonts/misc"
FontPath "/usr/X11R6/lib/X11/fonts/100dpi:unscaled"
FontPath "/usr/X11R6/lib/X11/fonts/100dpi"
FontPath "/usr/X11R6/lib/X11/fonts/75dpi:unscaled"
FontPath "/usr/X11R6/lib/X11/fonts/75dpi"
FontPath "/usr/X11R6/lib/X11/fonts/Speedo"
FontPath "/usr/X11R6/lib/X11/fonts/PEX"
# Additional fonts: Locale, Gimp, TTF...
FontPath "/usr/X11R6/lib/X11/fonts/cyrillic"
# FontPath "/usr/X11R6/lib/X11/fonts/latin2/75dpi"
# FontPath "/usr/X11R6/lib/X11/fonts/latin2/100dpi"
# True type and type1 fonts are also handled via xftlib, see /etc/X11/XftConfig!
FontPath "/usr/X11R6/lib/X11/fonts/Type1"
FontPath "/usr/share/fonts/ttf/western"
FontPath "/usr/share/fonts/ttf/decoratives"
FontPath "/usr/share/fonts/truetype/openoffice"
FontPath "/usr/X11R6/lib/X11/fonts/defoma/CID"
FontPath "/usr/X11R6/lib/X11/fonts/defoma/TrueType"
EndSection

Section "Module"
Load "ddc" # ddc probing of monitor
Load "GLcore"
Load "dbe"
Load "dri"
Load "extmod"
Load "glx"
Load "bitmap" # bitmap-fonts
Load "speedo"
Load "type1"
Load "freetype"
Load "record"
EndSection

Section "InputDevice"
Identifier "Keyboard0"
Driver "keyboard"
Option "CoreKeyboard"
Option "XkbRules" "xfree86"
Option "XkbModel" "pc104"
Option "XkbLayout" "us"

EndSection

#Section "InputDevice"
# Identifier "Serial Mouse"
# Driver "mouse"
# Option "Protocol" "Microsoft"
# Option "Device" "/dev/ttyS0"
# Option "Emulate3Buttons" "true"
# Option "Emulate3Timeout" "70"
# Option "SendCoreEvents" "true"
#EndSection

Section "InputDevice"
Identifier "PS/2 Mouse"
Driver "mouse"
Option "Protocol" "PS/2"
Option "Device" "/dev/psaux"
Option "Emulate3Buttons" "true"
Option "Emulate3Timeout" "70"
Option "SendCoreEvents" "true"
EndSection

Section "InputDevice"
Identifier "USB Mouse"
Driver "mouse"
Option "Device" "/dev/input/mice"
Option "SendCoreEvents" "true"
Option "Protocol" "IMPS/2"
Option "ZAxisMapping" "4 5"
Option "Buttons" "5"
EndSection

Section "Monitor"
Identifier "Monitor0"
# Wish we could use some probed settings here, too, but XFree4 cannot do this yet.
# HorizSync 28.0 - 78.0 # Warning: This may fry very old Monitors
HorizSync 28.0 - 96.0 # Warning: This may fry old Monitors
VertRefresh 50.0 - 76.0 # Very conservative. May flicker.
# These are some Modelines that happen to work on many systems
# Especially the "1024x768" has been thoroughly tested, even on Laptops
Modeline "640x480" 25.175 640 664 760 800 480 491 493 525 #60Hz
Modeline "800x600" 40.12 800 848 968 1056 600 601 605 628 #60Hz
Modeline "1024x768" 85 1024 1056 1152 1360 768 784 787 823
Modeline "1152x864" 92 1152 1208 1368 1474 864 865 875 895
Modeline "1152x864" 110 1152 1240 1324 1552 864 864 876 908
Modeline "1152x864" 135 1152 1464 1592 1776 864 864 876 908
Modeline "1152x864" 137.65 1152 1184 1312 1536 864 866 885 902 -HSync -VSync
Modeline "1280x1024" 80 1280 1296 1512 1568 1024 1025 1037 1165 Interlace
Modeline "1280x1024" 110 1280 1328 1512 1712 1024 1025 1028 1054
Modeline "1280x1024" 126.5 1280 1312 1472 1696 1024 1032 1040 1068 -HSync -VSync
Modeline "1280x1024" 135 1280 1312 1456 1712 1024 1027 1030 1064
Modeline "1280x1024" 135 1280 1312 1416 1664 1024 1027 1030 1064
Modeline "1280x1024" 157.5 1280 1344 1504 1728 1024 1025 1028 1072 +HSync +VSync
Modeline "1280x1024" 181.75 1280 1312 1440 1696 1024 1031 1046 1072 -HSync -VSync
Modeline "1600x1200" 162 1600 1664 1856 2160 1200 1201 1204 1250 +HSync +VSync
Modeline "1600x1200" 189 1600 1664 1856 2160 1200 1201 1204 1250 -HSync -VSync
Modeline "1600x1200" 202.5 1600 1664 1856 2160 1200 1201 1204 1250 +HSync +VSync
Modeline "1600x1200" 220 1600 1616 1808 2080 1200 1204 1207 1244 +HSync +VSync
ModeLine "1800x1440" 230 1800 1896 2088 2392 1440 1441 1444 1490 +HSync +VSync
ModeLine "1800x1440" 250 1800 1896 2088 2392 1440 1441 1444 1490 +HSync +VSync
EndSection

Section "Device"
### Available Driver options are:-
# sw_cursor is needed for some ati and radeon cards
#Option "sw_cursor"
#Option "hw_cursor"
#Option "NoAccel"
#Option "ShowCache"
#Option "ShadowFB"
#Option "UseFBDev"
#Option "Rotate"
Identifier "Card0"
Driver "vesa"
VendorName "All"
BoardName "All"
# BusID "PCI:1:0:0"
EndSection

Section "Screen"
Identifier "Screen0"
Device "Card0"
Monitor "Monitor0"
DefaultColorDepth 16
SubSection "Display"
Depth 1
Modes "800x600"
EndSubSection
SubSection "Display"
Depth 4
Modes "800x600"
EndSubSection
SubSection "Display"
Depth 8
Modes "800x600"
EndSubSection
SubSection "Display"
Depth 15
Modes "800x600"
EndSubSection
SubSection "Display"
Depth 16
Modes "800x600"
EndSubSection
SubSection "Display"
Depth 24
Modes "800x600"
EndSubSection
SubSection "Display"
Depth 32
Modes "800x600"
EndSubSection
EndSection

Section "DRI"
Mode 0666
EndSection