I just got a new keyboard with builtin trackball to use with my two retro systems via Belkin 2-port PS/2 KVM. The keyboard has a split PS/2 cable with the separate purple and green connectors. On my MS-DOS 7.1/WfW 3.11 machine both parts work great. My Win98SE machine is not being so cooperative.
Edit 02/03/2021: The DOS/WfW machine is a Socket7 QDI Titanium IB (430TX) with 128MB SDRAM

The keyboard part works fine but the trackball only works in safe mode. Additionally, it only works in safe mode if "USB Keyboard" and USB Mouse" are enabled in BIOS. If USB is disabled in BIOS then the keyboard still works but the trackball does not. When trying to use the trackball in normal mode the pointer will jump across the screen a few times then stop responding. I can connect a USB mouse and the pointer will begin responding to the mouse and work fine.

I do have another PS/2 keyboard and mouse set that works fine. I would really like to use this new one, though, because the compact all-in-one design is a space saver on my desk.

The specs of this machine are:
Biostar M7VIG400 Rev 7.1
Sempron 2800 (2.0GHz)
512MB RAM
Win98SE with unofficial SP3.65
SB Live! CT4780
Lucent 4-port USB 1.1 card
GeForce FX5200 with driver 45.23
Rocketfish 3.5" bay multi-card reader connected to mobo USB header
Perixx 505+ compact keyboard + mini trackball

Things I have tried so far:
Uninstalling DMA and USB 2.0 utilities added by the unofficial SP3
Uninstalled Zone Alarm and Avast!
Uninstalled nvidia drivers then clean install
CCleaner to fix registry errors
Removed all mouse, keyboard and HID items from Device Manager in safe mode
Removed all USB items from Device Manager in safe mode
Connected directly to computer without KVM
Connected directly to computer via PS/2 -> USB active converter
Loading BIOS defaults and resetting ESCD
Switching PnP OS from no to yes in BIOS

With the mouse lead of the KVM connected to the active PS/2 to USB converter it does work in both safe mode and normal mode, however Windows randomly freezes often when navigating files and folders.

Edit 02/03/2021 - Tried a couple more things:
Disabled shell extensions from MagicISO, XnView, 7-Zip, Nvidia
New keyboard's purple connector with old PS/2 mouse does work
After removing all USB items from Device Manager, disabled all USB controllers in current hardware profile.
Disabled EHCI support in BIOS
Used msconfig to temporarily disable DaemonTools

Edit 02/05/2021 - Also tried
Various PS/2 to serial adapters on COM1 and COM2

Edit 11/20/2021 -
I finally got a chance to attack this again. I tried disconnecting the Rocketfish card reader. No help. I renamed the Windows folders to a backup, did a clean install of 98se in PCem emulating a 430VX, then copied the new Windows folder to my disk. I thought of this for two reasons: 1) to identify or rule out the unofficial SP3 as a culprit, and 2) to watch the hardware detection and find out at which point it knocks out the trackball.

Using this method I did discover that the trackball works fine during hardware detection, but as soon as it installs a driver for the PCI to USB host controller is when the trackball stops working. On this mobo Windows finds three VIA Tech 3038 PCI to USB Host Controllers and one VIA VT 8235 USB 2.0 Enhanced Host Controller. In safe mode I tried replacing the VIA drivers with the Windows Standard but that didn't help.

So, I wonder if the ps/2 mouse port is on the usb bus, but not the ps/2 keyboard connector. Also, maybe the Perixx keyboard uses an integrated usb to ps/2 conversion.

Does anyone have any ideas I can try?