Windows Vista Home stops running until mouse is moved

I had to continuously move the mouse for my computer to do anything, so I reinstalled the operating system (Windows Vista Home) everything worked ok for a while until I tried to install the first pack of updates, some failed to install, I am trying to reinstall them again, but the computer stops loading unless I continuously keep moving the mouse. Anyone have any idea why this is happening?

I have an Acer 3 ghz ,2gb ram, EVGA Geforce GT240 1GB ddr3 PCI-E Video (just bought it) 450 watt power supply
 
Does it do the same with no mouse plugged in? Or same with a different mouse?
Or same with mouse in a different USB port?
 
Its a PS2 mouse and if I unplug it the computer stops responding until a mouse is plugged back in and moved. Actually if I leave the computer alone long enough it will start to process by itself, but it is really really slow, it speeds up when the mouse is continuously move.
 
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