It is possible to attach a serial mouse to the RS232 port.
The problem is the Serial Port HW on the PXA27x. You can only get an interrupt if the Serial FIFO gets to a defined fill level or if no chars are received for a 4 char time period. Now the fill level is set to 32 bytes by default (this means only every 10 mouse positions I get a stream with 10 positions simultaneously...). And if the Char Timeout is too big, I get 2 mouse positions practically back to back. The solution to solve this problem is to set the fill level interrupt to 1 char instead of 32. You can do that by adding the Registry settings:
You must Save Registry and reboot.
NOTE: if you use the serial port for something else, do not leave the WaterMarker at 1. This would be very inefficient for normal use.