Hi mac918, did you ever get this resolved?
I have the same problem .. using an Amazon Fire TV.
mame4droid (using .139 romset)
centipede as an example
mouse enabled in .ini file
mouse cursor shows on screen, as you said, mouse click will bring up menu, but once a game is running , only the mouse cursor is there (a big circle) and it does not register in the game as movement.