1. Yes, this will work.
2. This will also work....maybe. It depends on the mouse. Some have conventional optics, and some don't. The ones which don't can possibly be twiddled into submission, but they aren't a straight forward connection.
The other thing you need to keep in mind is the resolution you are after. The encoder wheels and optics need to be matched to work properly, so that is where the limiting factor will be. The more mis-matched the two are, the more crucial alignment becomes. Those optics are used with very low resolution trackball encoder wheels. You can get more out of them, but it can be tricky.