Yes, use the pullups when connecting the mouse. You are talking several feet of cable to the mouse. The weak pullups onboard a processor are just not enough when driving an "open collector" bus line over a length of cable. I would use a resistor of size such that you get the lowest value in ohms that just meet the specification of the 8051/8052 chip I_IL when you take the processor pin to a low level and add together the currents being sunk including that from the 8051 weak pullup, the external pullup, and any current that flows from the mouse end.

You may also need to investigate the I_IL capability of the chip in the mouse too. It may be spec'ed lower than the micro controller and as such you would have to raise the external pullup resistance enough to compensate for the lower sink capability of the mouse chip.

Michael Karas