Sorry to revive a slightly older post, but I got an issue with DirectInput on Unreal 1 as well (got 227i, vanilla, non-gold) I've played this game for like more then 10 years without any knowledge of DirectInput's existence, playing on like sensibility 3 without mouse smoothing all this time, I recently discovered it in the Advanced Options, turned it on and immediately loved it!
But found a problem a few days ago, I often play with music or check on my admin/summon commands on a notepad so I minimize my window many many times to check on things with Ctrl-ESC (since Alt-Tab doesn't work for U1 it seems). If I lower the window on fullscreen at least 3 times or click outside the Unreal 1 window if not on fullscreen 3 times, the game will display the mouse cursor when in-game or in the menu until I close the game completely, it's extremely annoying overall and it only happens if I turn on DirectInput.
I tried the rawHIDinput, had no problems of that kind with it but didn't like it as much since its a bit more laggy for me. I really need to know If it's solvable by any means.
FYI: I'm using Win XP SP3, my desktop mouse doesn't have the "Enhance Pointer Precision" checked