I don't know about the mouse side of things, but your 'preferred' resolution is actually set in Gnome using System > Preferences > Screen Resolution. The xorg.conf file tells the system what your screen is capable of, but the use of user defined screen resolutions allows each user to set what they would prefer as there resolution, instead of being stuff with whatever resolution the sysadmin for that machine thinks is 'Right (TM)'. It may well be that your mouse behavior is also user defined.
I discovered an older copy of my xorg.conf in /root. X seems to be using that. I did not realize X no longer defaults to using /etc/X11/xorg.conf first. Getting rid of the old xorg.conf fixes my resolution and mouse problems.
Ok so then what is system-config-display supposed to do? They both set the default resolution. Also what happens when your resolution is not listed in screenresolution?
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