I have a similar problem. Everything is OK with X with config:
Section "Pointer"
Protocol "IMPS/2"
Device "/dev/mouse"
ZAxisMapping 4 5
EndSection
With gpm, I have tried type=imps2. No good, but...
when switching off gpm (/etc/init.d/gpm stop) with that config, and
relaunching it with type=ps2 in the config file (as I had it before trying
to use the wheel), it works.
Any ideas?
Thank you!
Antonio