I would be interested to test out your scheme. I second the motion to send along schematics and documentation for this conversion.
For me, the ideal 486 must have a PS/2 mouse. So if this conversion works well, it will open the door to a lot more 486 systems.
The Vetra Systems conversion box isn't that great. I own 2 varieties of them. The tracking quality isn't so smooth, but it is usable.
Could you let us know how the quality of the mouse tracking was? Was it indistinguishable from a system with native PS/2 support?
Another means of getting PS/2 working on 486 boards is to wire up the appropriate pins on the Southbridge chipset. I've noticed recently that on PS/2-enabled 486 motherboards, the pins head on over to the southbridge. Some 486 boards, which have the same chipset as the PS/2-enabled motherboards, do not, for whatever reason, have PS/2 support. So this solution would be to wire up the appripriate PS/2 pins and write a custom BIOS update to support PS/2.
If you happen to have a 486 motherborad with an available PCI slot, you could always use the USB-to-PS/2 converters, but in my opinion, you really need a 4-slot PCI motherboard to have an extra slot (10/100, SCSI, and graphics are in the other slots). I have tested USB mice in Windows NT 4.0 and they work fine.
Plan your life wisely, you'll be dead before you know it.