Version of DOSBox?
Operating System you run it on?
Tried any other game in DOSBox to see if the mouse works in a different game?

Well, I reinstalled Daggerfall and the mouse seems to be working fine.
None of the ctrl+F keys are working though so I can't change cycles and what not without going through doxbox.conf.

I've tried Tyrian 2000 as well which was working fine, but again, none of the ctrl+ keys are working.

Windows XP Home Edition SP2
Dosbox .65 for Daggerfall
Dosbox .64 and .65 for Tyrian 2000

Edit: Mouse has quit working again in Daggerfall

Do you by any chance use an Logitech keyboard with an F-lock key?

MS too. In particular their wireless keyboards, which, unlike the Logitech keyboards, can't even remember the F-lock status between reboots (so every reboot the F-lock turns off which causes no end of problems obviously. At least the Logitech keyboards will remember where you left the f-lock key when you reboot and usually when you turn off the pc -- depending on how your motherboard handles USB powering.)

Anyway, check to see if you have a mapper.txt file. If so, just delete it and DOSBox will revert to the default settings. In particular I'm wondering if somehow it has gotten modified. Particularly it's possible to change the "modifier keys" from control and alt to other things (though last time I tried changing them I found that they worked a few times but then didn't anymore for some reason -- could just be a problem in the particular CVS version I was using at the time.) Oh, and I've noticed a few don't work in Ykhwong's CVS version, such as the grab mouse option whether your mapper.txt is modified or not. The same could apply to other CVS builds. Still, as far as I know they all do basics like the options to change the cycles, kill dosbox, etc, so if those don't work it's probably not the build's fault.