I am a newbie, love the site, very helpful! When I try to use my trackball it only moves the cursor up/down. What am I doing wrong?
Welcome aboard, KingBeef.

Sounds like you can move the mouse cursor in the Y-axis (up/down) in Windows.
1. Can you also move the mouse cursor in the X-axis (left/right) in Windows?
If you can move the cursor in both X-axis and Y-axis, the trackball is working -- look at software configuration.
2. If not, you might have a burnt-out IR LED in one of the X-axis optos.
You can use a multimeter to check the voltage on the optical board data lines.

When you slowly turn the axis, the data lines should alternate between logic high (near 5v) and logic low. (near 0v)
This quadrature waveform shows what you would see on the data lines (A and B) when you slowly turn the axis clockwise.

If both A and B data lines alternate between logic high and logic low when you slowly turn the axis, the optical "red board" is OK -- the problem is either with the data line connections to the optical encoder or the encoder itself.
Scott