I can't attest to the M5-1 from personal experience, but I can say that I had issues with the M5-2.
If you can, I'd try using just the trackball on a dedicated PS/2 port of a PC with a PS/2 port on the motherboard, see if that makes any difference. In my experience I was able to get the trackball working after several PC reboots on a dedicated PS/2 port.
Alternatively, maybe the SDL cable is defective on the mouse side of things; not sure where you'd obtain a replacement though; maybe Unicomp or ClickyKeyboards?