[barney]

No, it isn't the mouse. It worked right before I installed scandoubler and right after I removed it. Also, I tried 3 different denise chips and the same problem occurred on all of them. You may be right on the static damage, but I have never had a problem with static in the past (problem is over exaggerated in my opinion). I sent an email to amigakit.com and gave them a description of my problem and my system configuration. See below:

I have already removed the scandoubler. Until I put it back in, are there any ideas what it might be? The mouse video was working fine, all graphics on screen were fine and the mouse pointer was visible except that it moved erratically (not smoothly). Could it be a compatibility problem with my already existing hardware. Here is my system setup:
G-Force 030 (Impact A2000-030 Combo Series II, 33Mhz, 2 4mb gvp memory added for total of 12MB on board), Impact A2000-HC+8 Series II (autoboot disabled / board being used as a RAM expander only (8, 1MB SIMMS installed), 2 Chinon floppy drives, 1 scsi CD Rom Drive, 3 way rom switcher (1.3, 2.04 & 3.1), Lyra Keyboard adapter and Cocolino mouse adapter.
Installed Software: Magic Workbench, Anticlic (removed click from floppy drives), screen blanker and whdload.
Another interesting thing I noticed is that the Denise Chip doesn't fit firmly in the Scandoubler. The holes on the scandoubler are so round and wide, it doesn't firmly grab the prongs and hold them in place. It is almost as if the chip is floating in its position. (note: I don't believe this loose chip fitting to be the problem since everything works fine except for my non-smooth mouse movement.

UPDATE: Well, I installed the Indivision ECS Scandoubler in my Amiga 3000 using the "Installation PDF" and the problem persisted. The mouse buttons tend to work fine but the movement is either jerky or non-existent. Looks like it likely came to me damaged. I am in the process of exchanging it for a good one. Thanks.