In your bios, there is sometimes a setting that says ps/2 mouse enabled/disabled. Mine is in peripheral devices. If windows xp is not detecting the mouse, it is either a problem with the mouse or the port.
Are you sure you have the keyboard and mouse ps/2 connectors in the right sockets? silly question but a few have made that mistake.
look in the end of the ps/2 connector on the mouse lead, are any pins bent?