Absolute Mouse Support in Xorg
I've been reading bugzilla entries and Xorg code and finally have a pretty good idea of the general support for absolute USB mice. Windows apparently supports absolute mice natively (although both axis' have to be absolute or relative). I don't know how Windows interprets these coordinates (whether it converts them to relative movement or actually as absolute positions).
The Linux kernel supports absolute mice just fine. Of course, the Xorg I'm running on my system doesn't. Fortunately, there's a bugzilla entry against the evdev driver and initial support for absolute mouse events is present in Xorg CVS. To me, this means that it is a viable solution to this problem. It's at least as good of a solution as writing a custom Xorg input driver for Xen. It has the additional benefit of not requiring me to maintain a new X driver and I like that very much :-)