Darucas: You may encounter quite a lot of bugs if you play FS1 in software or Direct3D modes, and your issue may be part of them.
The best thing to do is to play it in Glide mode, which will allow the game to run easily and without graphical glitches seen with recent GPUs.
If you want to try it this way, download nGlide, install it and then launch freespace.exe, located in your game's directory. Select setup and make it detect the 3DfXGlide option.
You can force the game to run in various resolutions or some tweaks with nGlide's configuration tool.
If you encounter other issues, you can just as well play FS1 as a mod for FS2 Open!
Downloaded installed less than 5 mins after reading your post I had a mouse cursor in game. =)
The game seems to be working fine now except whith my old Saitek x52 plugged in when I start a map it spins but I can work on calibrating it. Thanks again.