Thanks for the response! I have an interesting job. My current task is to assure that we can still correctly produce Z80 binaries for some embedded systems, code that I and others originally wrote nearly 20 years ago. This means, in part, bringing up a build environment that the old Z80 production tools are happy with.
I may look into vDOS, though if it hasn't wandered too far from DOSBox it won't work: the assembler and C compiler kill DOSBox instantly with "Exit to error: V86 to 16-bit gate." Given time, maybe that's something I could fix myself, but the easier path was just to throw FreeDOS in a VM. A Windows 95 guest or something would probably work, too, as that is probably what I was using back then, but it seems like overkill where I just need a functional DOS environment.
The issue isn't that FreeDOS can't do anything with the mouse (there's a mouse driver there, so it probably could). The issue is that I don't *need* or *want* it to do anything with a mouse. There was a time when computers didn't even have pointing devices, ya know... just a man (or woman!) and his (or her!) teletype against the binary hordes. 
This isn't a long term project, so the mouse capture isn't a big deal for me. Like the OP, I just thought maybe there was a quick checkbox somewhere to tell VMWare not to capture the mouse cursor.
No biggie.
Dave