Sounds exactly like what I'd expect if you didn't have VMware Tools installed in the Guest. Having the Mouse become locked into th Guest console is the classic symptom of nat having VMware tools [fully] installed, sub-optimal video, network and possibly disk performance are the others.
However the multiple levels of redirection involved here might also be causing problems. I've happily run the VI Client in a VM running under VMware Workstation on top of Vista on my laptop controlling Windows VM's running on an ESXi instance on another laptop - both Dell D630's so they're not too far removed from the spec you outline above. It works reasonably well for the purposes of testing and I don't see the issue you describe, but then all the user interfaces in my stack are running Windows.
You have to pay for vSphere with its various modules and extra features but not to use the vSphere Client to connect to a free ESXi.
I think where you may be getting the license message from is although ESXi is free, you still need to request a free license key from VMWare.
Login to your ESXi box with vSphere Client and go to Configuration -> Licensed Features -> Edit.
If you are set to evaluation mode, that is what you are getting the license warning from.
VMWare should have emailed you a license key when you signed up on their website to download ESXi. If not, you can go through the download steps again and the license key should be on one of the pages.
For me, if I go to https://www.vmware.com/products/esxi/ hit Download, login with my free VMWare account, then on the page with all of the download links, at the top of the list is my ESXi License.
The reason you are seeing the license message about vSphere is that in the Evaluation mode, some of the extra features that are only available with vSphere are enabled, once you enter a free ESXi license, those will be disabled and you won't get prompted anymore.
Also, you can use the vCenter Converter in the standalone mode (runs off of your workstation) for free with ESXi. This tool is immensely useful for moving VMs on and off of ESXi. http://www.vmware.com/products/converter/.
Best Answer
You have to fix this at the Linux level. And that is going to depend on your specific Linux system's version.
For a virtual machine, though, I'd try to avoid working on the VMware console. It's not a good user experience.
Please see: Isn't Ctrl-Alt-Delete on Linux *really* dangerous?