dreamgal wrote:I turn on the machine to start the process of installing the Win 2000 software, and noticed the red curser/pointer is not working correctly. It stays to the right of the screen and flickers when I try to move it, but it will not move away from that area. It is midway between the top and bottom,
Sounds to me as if the trackpoint is broken in a way that the mouse pointer always and only drags to the right.
dreamgal wrote:and I noticed there's a little black tab that sticks out of the side where the pointer is stuck.
Could you post a photograph? Unfortunately I'm too unimaginative...

Is the red trackpoint cap ok and properly seated on the trackpoint stick? Try to remove the trackpoint cap by pulling it up. Does the problem persist? If everything's ok without the cap, reseat it properly or replace it with a completely new one in case it's worn out, and look what happens.
dreamgal wrote:Using buttons on the keyboard, I have tried to test the pointer, but was unsuccessful, as the buttons on the bottom was hidden behind the bottom windows bar, and I could not figure out how to move the screen down to see it.
Sorry, I don't get what you mean here.
dreamgal wrote:I then tried to install a mouse by transferring the driver software to a compact flash disk, and installing it from the disk. Looks like it was successful, because when I plugged in the USB mouse, it moved the curser - however, no better than using the red dot.
That's most probably the case because USB- and PS/2-devices (the internal TrackPoint is treated as one) coexist and interfere with each other when used simultaneously. You have to disable the Trackpoint in the computer's BIOS setup so that a defective TrackPoint won't cause any further problems. Consult your computer's manuals for precise information on how to do that.
If your TrackPoint proves being out of order and you don't want to go without one, you will have to change the whole keyboard of the machine, but that won't be a major problem. The Hardware Maintenance Manual that you can download here...
http://www-3.ibm.com/pc/support/site.ws ... IGR-4TCMCT
...(cf. p. 69ff.) will show you exactly how to do that. Currently IBM doesn't have replacement keyboards in stock (my request on IBM's US-located Ready2Buy online shop system some minutes ago only gave negative results), but you will find vendors via google or perhaps on ebay. I guess the keyboard shouldn't cost more than around 50 USD. Here are the FRUs, I guess you are out for a US version of the keyboard, that's FRU P/N 02K5218:
http://www-1.ibm.com/support/docview.ws ... IGR-4TYQVE
OK, now it's up to James and the other pros here to give you more substantial info, as I don't even possess a TransNote (yet). And, oh, I almost forgot to congratulate you on your beautiful new machine!
Best,
Monty