That's weird! Maybe it's some confusion between the PS/2 mouse and the PS/2 keyboard both using the same I/O port.. Does it help if you give it a little keyboard input before the mouse input? What OS are you running QEMU on?
I tried giving some keyboard input before using the mouse, no change. I am using Debian Stretch. If there is a more appropriate venue where you'd prefer continue this conversation, let me know.
and it works! Boots in like .1 seconds. Very neat.
One strange thing, in QEMU, the mouse is all crazy and I can't control it in a usable way. Jumps around.