I'm sorry I don't have an answer either, but ran into the same problem myself. I've tried both versions 1.2 and 1.5 and both run into the same problem. I've also tried adjusting the configuration file manually, and get the same results. As soon as you change the resolution, you get crazy mouse.

I know that I once had Scorched Earth running in Windows. I can't remember which version it was, but it wasn't as fun as playing it on my old 286 because the suspense wasn't there - this 1.3 GHz processor calculated those shots so fast that you didn't even get to watch your shot - and forget trying to aim properly, it spun your turret so fast that getting just the right angle was impossible.

It's a shame because, out of all the games I've gotten to run, this was the one I wanted to run the most. I still remember huddling around the keyboard in my early teens and playing this game with as many as 9 other people. Those were the days!

maybe the next version will help I changed the mouse set sensivity stuff a bit recently

I'll keep my eyes open for the new version when it is available, and make a post as to whether or not there's a difference. My hope is that there is!

Also, let me just say thanks for an excellent program. DOSbox has solved the ancient problem of running DOS games on new computahs. Until now, I've had to keep both a 386 and an early Pentium lying around for running older and newer DOS games, respectively. Now all I need to do is run DOSbox, and there's less clutter too. w00t.