Try the options i8042.reset and i8042.nopnp (separately and together). If still nothing, and it works in earlier kernels, please boot with i8042.debug and post a bug report to the kernel bugzilla.
Thanks for the suggestion. reset, nopnp, and noaux had no affect of the function of the mouse even though noaux cleared the failure message. The PS/2 mouse isn't too much of an problem for me since I will only be using USB devices.
A bigger problem is when I exit X I can only see a few characters in the prompt. They are not always the same, sometimes I can only see the "y" character, other times its only "t". Sometimes I can see everything but after issuing a few commands all but a few characters disappear...
If I boot with the text bootcode then the prompt is ok and acts normally. It only has this problem after X has been started. This happens with either Xvesa of Xorg without 3d, when the Xorg-7.5-3d extension is loaded then everything works fine...
I guess I'll have to use Xorg with this board, also I tried using Xorg -configure as stated in the info file but this resulted in a segmentation fault and gave an unusable conf file, so I tried the vesa one that was included and that seemed to work. I attached the Xorg.0.log with the seg fault.
I tried 2.11.4 on this board and looks like these problems are present there also.