Mouse works fine until either a network cable is plugged into the network card or into a USB/Network adapter. This makes it impossible to log onto the net via router to get virus updates. Mouse goes nuts opening multiple windows etc. Have tried numerous mice. PS2 and USB.

Justice comes to he who waits

There are a lot of USB connected things that won't work properly if they are connected to a hub, even if it is a powered hub (can supply the full 500ma to every port).
Most mice and keyboards work fine in a hub; scanners, printers, often don't; web cams, cameras, networking devices, card readers might, might not.

Take a look in System Information.
Start - Programs - Accessories - System Tools - System Information
(or Start - Run - type msinfo32)

Open up Components on the left - click on Problem Devices - there should be none.

Open Hardware Resources
click on Conflicts and Sharing - something other than a listing of shared IRQ's is a no-no, especially if it has red lettering. Three or more devices sharing the same IRQ, one of which is IRQ holder for PCI sharing and not a worry, is to be avoided if possible.
It is advisable for nothing to share the IRQ with the video if possible On most mboards the first slot (next to the cpu if you have onboard video or no AGP slot, or next to the AGP slot) is forced to share the video IRQ - don't use that slot if you have a choice.
USB mice usually do not cause problems, and USB devices usually do not clash with each other, but if you see you have more than one IRQ listed for USB (e.g. if you have both USB 1.x and USB 2 controllers, or you have a USB controller on a card that uses a different USB chipset than the mboard does), try plugging the mouse or any USB device into the controller that uses the other IRQ.
Also there are two USB standards other than the USB number rating - OHCI and UHCI I believe are the names - some USB devices work fine in one type, do not work or do not work properly in the other type. If you have two types, try a different port in a different type.
Also, some devices meant for USB 1.x do not work in a USB 2 controller properly, even though it is supposed to be backwards compatible with USB 1.x. If you have the choice, try plugging the device meant to be USB 1.x compatible (such as a mouse) into a USB 1.x controller port.
(How do you tell which port you have plugged into if it isn't obvious? Device Manager - System Devices - Universal Serial Bus Controllers - USB Root Hub - Properties - Power tab - Power Properties. If there is something plugged into a port it will be drawing xx ma, more than 0, and usually it's description tells you what it is.)
If you plug in a PS/2 mouse it uses IRQ 12, and nothing else can share IRQ 12 - if something was using IRQ 12 (if you bios settings allowed that) before the PS/2 mouse was plugged in, it is forced to then use another IRQ - if you have a lot of devices using IRQ's that can force the device that was using IRQ 12 to not find an IRQ, or to share an IRQ with some other device it doesn't get along with 100%.

Hardware Resources - click on IRQ's
In Win 95/98/98SE and probably ME if there are any IRQ's available, they will be listed with "free" beside them. XP tells you nothing about that there.

If you have three or more devices sharing the same IRQ, one of which is IRQ holder for PCI sharing and not a worry, you could try moving cards to another slot or swapping their positions, turning PNP aware OS or similar if it is there in the bios on or off from whatever it is now set to, or taking steps to free up more IRQ's - IRQ's 3 or 4 or 12 can often be freed from their default ISA uses if they are not being used.
If your mboard has any of: built in LAN/NIC, an AMR modem slot and you are using something in it, built in audio, or some other built in device, some or all of them may be using the same IRQ, you often can't change that, and those devices will work fine - just make sure other devices don't use those ORQ's if you can help it.

To add to:
Hardware Resources - click on IRQ's
In Win 95/98/98SE and probably ME if there are any IRQ's available, they will be listed with "free" beside them. XP tells you nothing about that there.

IRQ 3 or 4 will only show up as free or as used by a device other than Comx if the Comx (serial) port(s) have been turned off in the bios, and the bios actually releases the IRQ's for other uses (on some older computers it doesn't).
IRQ 12 will only show up as free or as used by a device other than a PS/2 mouse if the PS/2 mouse support has been turned off in the bios, or if the bios is set to Auto detect a PS/2 mouse and you are not using one, and the bios actually releases the IRQ (on some older computers it doesn't).
......

You can sometimes get USB to change the IRQ it uses, if a free IRQ is available, or sometimes in any case, by turning off one or all the USB in the bios, saving bios (cmos) settings, re-booting, then going into the bios and turning it (them) on again.

Hey Tubesandwires, you must think that this mouse behavior is due to an IRQ conflict.

I haven't had an IRQ conflict ever with Windows XP.

Could something else be causing this behavior?

He has several alternatives if what I suggested doesn't help. The easiest ones are to do something about the mouse.
- if the USB mouse came with a PS/2 connector on its cord, and he is using a USB adapter that came with it, stop using the adapter and use it in a PS/2 port.
- use another PS/2 mouse
- use a serial mouse
- get another model, preferably another brand, of USB mouse, preferably that has a PS/2 connector on its cord and a PS/2 to USB adapter so that he can connect it either way if it still causes problems connected as USB.
....

Possibly an IRQ conflict, but just as likely there may be a need to use a different USB controller, and that controller is easily identified if it uses a different IRQ - that doesn't necessarrily mean there is an IRQ conflict involved.
In my limited experience with XP it seems to handle these things much better than previous op systems did in general, but if your device doesn't get along with a particular USB controller XP can't do much, if anything, about it.
Also, how many IRQ's XP has available depends on how old the mboard is - on older mboards you still have only 15 total in XP, on newer ones you have many more, and on those newer ones you are much less likely to have IRQ problems. If you have a lot of devices that use IRQ's on an older mboard, you can still have problems.
XP is just as clumsy in dealing with IRQ 12, and often 3 and 4, or whatever the IRQ's are assigned to the Com ports in the bios if you can choose them, because if the Com ports and/or PS/2 mouse port are used, they are still forced to use ancient legacy ISA technology - it may very well deal with them better when they are not used for legacy purposes.

I have noted that if you have a USB controller card that has a different chipset than the mboard does, it always seem to use a different IRQ (that may also depend on which is UHCI or OHCI); I've read some places that if the chipsets are the same they will use the same IRQ, but I've never been in that situation.
I have also noted that USB 2 controllers always seem to use 2 IRQ's - one for USB 1.x in the chipset, another for USB 2, and however many host controllers for each use the same interrupt.

Sometimes USB devices DO clash, but in my experience it's rare. I have a USB connected Logitech mouse (Wheelmouse - MBJ58) that will not co-exist properly with a USB connected adapter (JADAC) that allows you to connect a model airplane RF controller, that you use in real life with your actual model airplane, by cable through it to the computer and use it in the RealFlight model airplane flight simulator.
When both are connected the mouse sometimes flashes it's optical light while booting, sometimes the boot freezes, sometimes it freezes in Windows, and the computer sometimes has to be rebooted because the USB adapter for RealFlight is not found. If I disconnect either one they work fine. I looked all over for a solution, there was nothing obvious to be found wrong in Windows 98SE otherwise when they were both connected. The JADAC guy had never heard of the problem before. Logitech site was of no help - I would have tried newer drivers if available - if I did they were no help.
They seem to work fine on other computers, in both 98SE and XP, and I've had no problem with any other USB devices.
This is on a computer with only one USB controller (Via), two ports, on one IRQ, both devices connected directly to the ports.

Going back to this:
"Mouse works fine until either a network cable is plugged into the network card or into a USB/Network adapter. This makes it impossible to log onto the net via router to get virus updates. Mouse goes nuts opening multiple windows etc. Have tried numerous mice. PS2 and USB"

You didn't say you tried a serial mouse - try one - if you can't find a new one, go to a used parts place - I use old Microsoft combo serial / PS/2 mice that are as much as 20 years old and they work fine. They are serial on the cord end (I've never been able to find the proper adapter - I've tried several configs - or find the wiring for the adapter).

Here's another one.
You can have as many as three mice connected at the same time, and you can use any of them, one at a time at any time, and switch back and forth if you need to.
He could do this with his USB and another mouse, and use the other mouse on the internet.

You have any two of, or all of, a serial mouse, a PS/2 mouse and a USB mouse connected at the same time, if you have enough IRQ's available, and Windows will recognize all of them.

He could, and I personally would prefer to, use a serial and USB mouse and free up IRQ 12 so that it can be used for more than one device, or be used for a USB controller, and you would have two or more possible choices of IRQ for the serial - Com - ports.
...

It still sounds to me you have a conflict going on, but since both USB and PS/2 mice are not working right, it is more likely the USB/Network adapter, or possibly the network card, that is the problem. If a serial mouse does not work either, obviously the problem isn't the mice.
Make sure the USB/Network adapter is not connected to a hub. Try a different USB controller.
Try to get the network card to use an different IRQ, or if it is sharing an IRQ with two other devices, to get one of the other devices that is sharing it, other than IRQ steering, to use a different IRQ. You probably can't change it's IRQ in Device Manager, even if you turn off use automatic settings. You will probably have to move it to another slot, or free up some IRQ's so that it or something else it shares an IRQ with can use a different one.
........

And another - your Network adapters may be clashing in some unseen way, even when you are not using both of them.

Device Manager - disable the one you are not using at the moment
or
Control Panel - Network Connections - disable the Local Area Connection you are not using at the moment (RIGHT click to find that)

Thanks for the advice guys as i had not come across this before and its a tad annoying.

It works fine with a serial mouse and is downloading updates as we speak. I noticed that IRQ 12 is assigned to the USB by the bios, so after the updates i will have a bash at changing the bios setup to see if i can nip it in the bud before xp boots.

Justice comes to he who waits

Good to hear a serial mouse works.
Thanks for letting us know,

"I noticed that IRQ 12 is assigned to the USB by the bios, so after the updates i will have a bash at changing the bios setup to see if i can nip it in the bud before xp boots."

Don't even think about it unless you have at least one IRQ free, or you will put yourself back in the same situation. Get as many IRQ's free as you can before proceeding. There are not many things that will use IRQ 12 and in my opinion to have USB use it is ideal - it is a waste to have a PS/2 mouse use it. Others with 12? - some Network cards, not much else. Dial-up modems, sound cards or chipsets can often use a wide variety of IRQ's. Sound often can use IRQ 5, as can a Parallel port, but is best not to use an IRQ for the latter at all. Some things refuse to use Irq 9, 3, 4, or 7. leave ACPI disabled if you don't need it to leave IRQ 9 free. Not many things will use IRQ 7 .
....

A summary of what worked for you would be helpful for others in future.