It's possible that there is a power problem. COM1 is a 5-wire serial port, which might not supply enough power on the RTS line to drive the mouse fully. Have you tried connecting the mouse to COM3 of your GCX? It's a 9-wire port that offers both RTS and DTR as power sources for the mouse (see details at topic 151).
Looking at the debug messages, I see that it's not reporting the usual: "SerMouse : No mouse found. Returning serial port to original status.", so something is happening with the mouse driver. It's not clear if power problems are creating communication problems, or if the driver is having some other issue.
I would try the following: (1) Confirm that when you disconnect the mouse, you get the "No mouse found" message. (2) Change the registry to use COM3 for the mouse and the HWT file to route the debug output to COM1.