Try running the game with GOG's executable (iwar_start.exe), from the game's installation folder. For some reason, that is not the same executable linked from the Games folder in Windows 7. That fixes your problem and the audio desynchronization during FMVs.

I had exactly the same issue as you, in that the mouses movements were restricted to the upper left corner of my screen. It's probably a monitor/driver scaling issue and i did manage to solve it by adding -b -16 -800x600 to the desktop shortcut as covered in that other thread 'changing resolutions in Independence War'.

Right click on the desktop icon for Iwar, select 'properties' and then add those additions at the end of the 'Target' line, making sure a space is put between each command.

After that my mouse was able to move around the whole screen and i could play the game. I'd definately look to get a joystick for this game though, it is effectively a flight-sim set in space.

[EDIT:Update]

Sometimes even after making those changes( -b -16 -800x600) the mouse will still get stuck in the top left of the screen. Simply exit the game and relaunch it and it then seems to work fine!