There is a deliberate lag in mouse movement, with the quasi-realistic "heavy" feel of mouse movement. I've found that if I make just one mistake, i.e. the yellow bar starts to move towards the left, it's extremely difficult to get it back on track, except maybe in the easiest of armwrestling matches.

QQ wahhh i can't do this ITS BROKEN WAAHHHHHHHHHHHH

I had the same problem - that mouse lag is horrendous. Try lowering the resolution (right down to 640*480 if you have to) before the arm-wrestling competitions.

Hrm - the tool tip for the game was either bugged or uninformative, as I had no idea moving the mouse did anything. I tried W & D, then clicking the mouse. Clicking the mouse seemed to work but, as my system can barely run the game as it is, I still fail at any arm wrestling attempt. Not going to say its broken [as it is WAI] but I don't care for mini games like this personally [same with most mini games that developers throw into their products, so it isn't just something I have against The Witcher 2]

If your mouse is at all sluggish in menus then it will be so during armwrestling as well. Good luck, but don't hope for much.

I have a system just above the minimum requirements. I can run with 20-30 fps. But the mouse cursor moves as if I'm pushing through syrup, in all situations.

A system that can barely run the game will not allow you to armwrestle. It's just that simple.

You can lower resolution and it will improve mouse function.