ummm... I have used my PS/2 connected MS Explorer mouse optical since version 3.x and have had no problems, so it is not a problem with optical mice, it is probably a problem with the mouse chosen in Xfree86, but usually it results from some other piece of hardware (what I have noticed in multiple environments) not the mouse directly.

Have you tried the 'nowheelmouse' cheat to see if that is the problem (or was it that you had to enable the wheelmouse in 3.3, mind is drawing a blank), and have you booted with the testcd option to verify that the disk is good. You may just want to go and DL the newest 3.4 that was released yesterday, then you could try to see if the problem was fixed with some driver upgrade.