Yeah, it's very frustrating. After I made my post, I logged off the char I was on using the X in the upper right corner. Restarted UO and logged her in again and the mouse thread option was checked. However, when I switched to a character on a different account that I KNOW has had that box checked, it was all of a sudden unchecked. It's very strange and I have yet to figure out what seems to consistently trigger that box not being checked. Logging in for holiday tickets, all would be fine until I'd hit one particular shard and it would not be checked. Same account, just a different shard.
I guess I should just be glad that most of the time the box stays checked. But it's sure annoying to log on and realize the mouse/cursor are acting wonky and then check and find out that yes, indeed, that little box has unchecked itself and you have to log out and back in again to fix it.