I think I have isolated the problem with Windows 95c and the serial port emulator card. Even though you disable COM 1 in the BIOS, Windows 95c still insists on re-enabling it. By the way, I'm testing on a Nx586 PF110 without a ps/2 mouse port. I was using a bus mouse card before installing RIO444's emulator card.
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Perhaps in SafeMode, COM1 isn't actively enabled, which allowed for mouse support in Safe Mode.
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Reboot into normal mode, and observe the Standard Serial Mouse settings, and this is what you would see:
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I needed to enter Device Manager and disable COM 1 in that profile. I rebooted and the mouse worked, but I get a yellow exclamation on Microsoft Serial Mouse with Wheel, which I I selected after installing the Intellipoint 2.0 software.
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I was using a Logitech optical mouse with scroll wheel for testing and the Logitech Serial Mouse drive didn't have a yellow exclamation. I suspect that using COM1 on a system which has a COM1 on board can cause problems with the emualtor card. In the series of images you can see the mouse trying to use IRQ 9, which is impossible because the IRQ's and addresses are hardware set. Given these difficulties, pehaps being able to set the mouse for COM3 or 4 would be of some benefit?
I'm also using the operating system-supplied Logitech Serial Mouse driver for Windows NT 3.51 and it works just fine. Even with using the KVM, I didn't experience any noticeable lag. But i'm unable to get the Logitech optical mouse with scroll wheel working. Perhaps you can retrace your steps and post back?
Is there anything I can change on emulator card to work with COM 3/4?
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