I saw the avrusb project but I guess I do not understand why you need to put a different USB adapter on if there is already one built into the diecimila.
I want to use an arduino as a simple mouse device (sends position , mouse clicks etc.).
It would be ideal to make this work via the built in usb and not need any custom drivers/software on the PC. I am assuming this means I need to get the arduino recognized as a standard HID device?
As is always explained when this topic comes up, the chip on the arduino that talks over USB can ONLY be used to talk with the computer as a serial port - not as an HID device or mass storage device.
Equally it cannot be used as a USB host port - you can't plug in a memory stick or anthing like that.
The AVR-USB project removes the USB chip and talks ti the computer directly. Various versions of the AVR-USB software lets you talk to the computer as different devices, one of which is as an HID device.