|Mmm - that's a tricky one. Do you have any proprietary mouse software installed such as Microsoft's Intellipoint or something similar from another mouse brand?|
If yes, try uninstalling it. Proprietary mouse software is not required for the mouse buttons or scroll-wheel to work in basic mode.
Definitely sounds like a software/driver conflict somewhere.
If removing the mouse software makes no difference (or no mouse software is installed) I can only suggest you go through a process of elimination with drivers.
If you start Windows in safe mode, only the minimum of Microsoft's own drivers are loaded. No third party drivers are loaded. Microsoft's own mouse driver is loaded so the mouse can still be used. If you can get PS-CS4 to start in Windows safe mode and you don't get that problem, it's definitely a driver causing it (either a device driver or an application's virtual driver such as in cd-burning software).
Update: just seen your reference to Win 7. You didn't mention that in your first post - this forum is for Windows XP!
Anyway, you could easily have some software installed that isn't fully compatible with Win 7.
There's a compatibility database here: