From there, I'd try a couple things. First (least technical) is to make sure you're getting enough power to the board. To do that, either try a
powered usb hub, or a F-MM usb hard disk (or data/charge) cable that looks like
this one. (Not a recommendation of that particular cable; it just shows the kind I mean.)
Second would be to test the emitter/detector boards directly with a multimeter (might be easier than swapping wires.) There are instructions on the bottom of
Ultimarc's Optipac page that explain how to do that.
You could also see if you can easily swap the X and Y wires on the trackball itself to determine if it's the main board that's flaky or a emitter/detector pair. I don't know what your wiring looks like, but if you have purple and blue from one side, and yellow and green on the other, you'd swap purple with yellow, and blue with green. (If red/black tests to 5 volts at both boards, I wouldn't bother swapping those)
Connecting to the UltimateIO is pretty straight-forward (if you have the connectors to do it), and you're bypassing the trackball's main board that way, but if you have a problem with the optical parts, that'll carry over.