What stryder said ;D
If you dont mind, try posting the /etc/X11/XF86config file. But here goes a stab at your problem anyway...
The XFree86 configuration file is actually quite simple, even for tasks that are not quite so easy to make happen behind the scenes. The fellas that made XFree did a nice job for us morons ;D To keep it simple, X needs to know what device you are referencing (such as mouse0), what driver to make it use, and any special things that it should do (like override driver defaults, change a behavior such as making a 2-button mouse act like a 3 button mouse).
For example, here are my mouse & trackball settings for my computer. I have renamed the mouse0 and mouse1 to more usable names. So if you choose to do so, please make sure that EVERY location is corrected. Otherwise X wont work quite right ;D
The ZAxis remapping command is for mouse wheels. The +/- axis change is technically a button, so it gets a button name in X. For wheels to work that needs to be present. Now, for you, you should be able to copy what I have and use that with only needing to change the /dev/ttyS1 to S0 (as stryder mentioned above). Now I do not have a Microsoft Trackball, its a generic/Mitsumi IIRC. However thats the name of the protocol.
Option "Device" "/dev/mouse"
Option "Protocol" "ExplorerPS/2"
Option "Buttons" "7"
Option "ZAxisMapping" "6 7"
Option "Device" "/dev/ttyS1"
Option "Protocol" "Microsoft"
Option "Emulate3Buttons" "yes"