It sounds like a trackball or wiring problem. I know folks are going to get tired of me stating this, but that Opti-Wiz was actually attached to a trackball, to make sure it was functional, before it was put into a box.
I see that it was a solder version. Instead of checking for just continuity, also check for errant solder connections to neighboring pads (shorts). Also make sure that your wires aren't fraying by the board and doing the same.
Also, you can try swapping the X and Y. If the problem changes to the other axis, it's something in the trackball.
You could also post some photos, or send them to me, to see if there's an obvious problem you might be missing.
RandyT