At least two reviews mention a "mouse lag" problem associated with W&W. I'm a day 1 player of W&W, have played it on at least 4 or 5 very different PCs, seen several bugs, but not one which could be described as "mouse lag problem" (I myself am using a mix of mouse and keyboard to play the game).
Could someone describe this problem please?

If someone suffers from this problem, it would be useful to mention the PC configuration (OS, graphics card, ...) and the game settings used (I'm not saying I can help, but the information may help narrow the problem cause down). It may also be worth trying the (unofficial) Town AVI or graphics patches.
The game can also be played with the keyboard (configurable bindings).

... except that the W&W forum didn't exist when I asked my question.
By the way: The "Ultima Series" forum is used for discussing the Ultima Underworld games, and W&W is at least as close to the Wizardry series as UU1/2 are to the Ultima series.
But now that the W&W forum exists, I'll use it in the future.

I have the issue. WIndows 7 64-bit, nVidia GTX 765M and Intel integrated graphics (through Optimus), using a Razor Naga Hex mouse.

The best way to explain the mouse lag problem, is in the game if I move the mouse slowly there's no movement on screen. If I move the mouse normal speed back & forth, the mouse moves in the game. So, basically I have to move the mouse quickly and stop right over the button/object I need to click and if I miss, I can't move the mouse slowly I have to quickly move it away and quickly move it back and try again. Rinse and repeat until I get it over the button, makes the game incredibly difficult and frustrating.

I think I pretty much fixed things with the mouse. First I downloaded and installed the GOG version of the game.
I set my mouse to 125 polling rate, sensitivity to 1800, and Acceleration to 8 which helped a tiny bit. I then downloaded and installed Heuristic Parks unofficial patch v1.0 and afterward it asked to install CD-ROM Disc 2. I then downloaded and installed Ludmeister's Wizards and Warriors Mod v1.1, rev.1 which does mod the game (it helps with bugs, fixes balance issues, and changes some aspects of the game for balance/enjoyment issues) so it's not the exact original game but it fixes the CD-ROM issue if you have a full install. I noticed an improvement, and think this was the biggest help to the mouse issue. I then changed the graphics setting of the game to use D3D instead of Software (which all should if using Windows XP+). The mouse is now very close to working perfect, definitely playable. Oh, and I right clicked the shortcut and set it to compatability mode Windows 2000.

If it doesn't work for you, don't ask me I'm no expert those things really helped my install.

check the profile... this software has issues with Microsoft updates