Courtesy of the comments at Arcanecode:
Use the RIGHT ALT + V to paste the below lines into Ubuntu. Much easier than typing it out.
1. Reboot in recovery mode by pressing ESC on the GRUB screen
2. wget http://librarian.launchpad.net/7583925/unsupported-patch-for-87262.sh
3. chmod +x unsupported-patch-for-87262.sh
Voila! The mouse now works!
*Note: If (aka when) Ubuntu updates its kernel, the mouse will probaby stop working again. Reboot and choose the patched 2.6.20-15 kernel from Grub. I hope they fix this upstream!