I created my first PiPlay card the other day (yes, I'm very late to the party), and found that mouse input was very laggy for all apps, and I had the same problem in standard X as well on a vanilla Raspbian install. Found a discussion that indicates that for some mice (mine is a wireless Microsoft mouse), it's necessary to add the parameter "usbhid.mousepoll=0" to the /boot/cmdline.txt file. Evidently some mice don't take kindly to having their polling interval reduced in some way.

Currently working on building up a custom cabinet design, with the plan being to hook up arcade controls from Ultimarc using their I-pac2 interface. Since this allows all of the physical controls to be wired to a single USB device, which can easily be plugged/unplugged, I'm thinking about making the actual controls panel be removable, like a refrigerator shelf, and building a second one with an inertial spinner and trackball in addition to some standard buttons, to accommodate playing games like Centipede, Arkanoid, or Tempest which just wouldn't be the same without the right controls. Having the control set be replaceable should allow the overall build to still be relatively small without having the thing wind up being a mile wide and fully arcade sized.