Alright, so the buy 1 get 1 free deal is out and I'm thinking about getting this game. My question is what is the optimal way to play this game? Mouse, keyboard, or gamepad?

It's a matter of personal preference. I use keyboard only.

Yeah, it depends on what is most comfortable for you. I use the traditional WASD + Mouse control that I picked up from FPS games for Descent 1 and 2, and I assume Descent 3 is much the same as far as control goes.

Just bought this also. How do I enable the mouse in controls. I have clicked on the "mouse" instead of joystick, but when I start a game, I cannot move the ship at all with the mouse, only the keyboard.

My XBox360 Gamepad doesn't offer near enough buttons for this game :)
I use Keyboard + Joystick myself (very similar to Keyboard + Mouse for normal FPS games). Mouse control just doesn't work well for me when it's not instant.