Is it wrong to answer my own question?!?
Anyway…for anyone who might be interested, I have found a solution to my problem. After spending quite some time looking at various functions of powercfg.exe in Vista, I was able to determine my hardware was waking the system. As the mouse information was still being cached (even though the monitor shut off) this was waking the system.
from command prompt (as administrator) type powercfg -devicequery wake_armed
this will list devices that can bring the system out of sleep
simply go to device manager and the wake ability.
A little update to my issue…
If you disable the mouse’s ability to wake out of sleep, you won’t be able to use the mouse to break screensavers either, the only option will then be a keyboard or by pressing the power button on your computer. This may be a slight inconvenience, but I don’t think its anything that can’t be dealt with.