The udev rules look ok, and I grep'ped for fuse in /etc, tce.installed and some other places but I didn't find any leads. I'm hoping it was something I did while trying to get it built and tested, and I'm not doing it (wrong apparently) anymore.
As for the Xvesa mouse problem, I have confirmed that it does work right off the iso for TC 6.4.1. I've tried about every option I can think of for Xvesa for TC 7 but I can't get a mouse to work. I have determined that it looks like Xvesa is "hunting" for the protocol. In the log file it cycles through "switching to mouse protocol bus" then ps/2, imps/2, exps/2, then it starts over and it does this many times. What I can also confirm is that in both TC 6 and 7 there is an entry in dmesg for "mousedef: PS/2 mouse device is common for all mice". However in TC 6 if I cat /dev/input/mice and move the mouse I get data, whereas in TC 7 I do not. But in TC 7 the mouse works in Xorg, even though /dev/input/mice still doesn't dump anything.
Right now I have four VMs with the same virtual hardware. One is TC 7 beta development where I build and compile. The second is TC 7 beta test where I test extensions. These two are running Xorg and open-vm-tools and the mouse is working fine. A third is booted from the TC 6.4.1 iso (not installed) and Xvesa/mouse are working fine. The fourth has TC 7 beta installed with Xvesa, mouse yet to work. So far I've tried the graphics-KERNEL extension, xf86-input-vmmouse, xf86-input-evdev, different -mouse options, -softCursor, -dumb, different vesa modes, but so far no luck. All ideas welcome at this point.