Why does it lag so much?
Output of qubes.InputMouse:
sys-usb dom0 allow,user=root
$anyvm $anyvm deny
By any chance are you using current-testing repositories? and if so, did you update all your templates with current-testing repositories too? If only dom0 is updated, or if not keeping the updates in sync between dom0/domU, then it might cause smaller issues, i.e. it might be possible to cause an issue like this one.
It's not exclusive current-testing either, however it's more easy to make the update-sync mistake for current-testing updates. In general every Qubes update repository must stay in sync across the whole system.