Okay so I got it working for me. For anyone who reads this, here is the script. Same as before like smallg said but had to change couple things. Also do not put this bit of code in the same script you use to detect if the mouse is hovering over buttons or whatever, give it its own script. Hope this helps someone.
if something == 1 then
ActivateMouse()
g_MouseX=50 <<<<<<<<<<<<<<----- added this so that the mouse starts in middle of screen when we want to use it
g_MouseY=50 <<<<<<<<<<<<<<----- added this so that the mouse starts in middle of screen when we want to use it
oldmousex=g_MouseX
oldmousey=g_MouseY
something=2
end
if something == 2 then
newx=g_MouseX+((g_MouseX-oldmousex)*speedmod)
newy=g_MouseY+((g_MouseY-oldmousey)*speedmod)
if newx < 0 then
newx=0
elseif newx > 100 then <<<<<<<<<<<<<<----- I would mess around with this, mouse gos off screen at 100 x
newx=100
end
if newy < 0 then
newy=0
elseif newy > 100 then <<<<<<<<<<<<<<----- I would mess around with this, mouse gos off screen at 100 y
newy=100
end
oldmousey=g_MouseY <<<<<<<<<<<<<<---------------- change this to g_MouseY=newy
oldmousex=g_MouseX <<<<<<<<<<<<<<---------------- change this to g_MouseX=newx
SetSpritePosition (spr_two, newx,newy)
end