Just did some experimentation. I can get the game to work on both monitors.
I set the resolution manually in the pref.ini to 2560x1024.
The problem with the mouse cursor and slow movement was the anti-aliasing. When I set it to 0 the game worked. When I set it to 6 the problem surfaced. Fullscreen or windowed options had no effect.
On observation, though. The game is very usable over the two monitors, but the dialog screens are exactly in the center of the screen. It would be nice if a setup option allowed them to be placed the right or left side of the screen . That way they would appear on onemonitor or another. I think Win XP default is to have the left monitor your main one.
Flash , movie and setup screens and animations are streched. I noticed this when I was also playing at 1024 x 1280 rotated resolution. No bigge but the animations are squashed and you get short fat aliens.
One weird thing though. I can manually setup 2560 x 1024 in the pref ini file and it plays ok. But As soon as I start the game the resolution resets on the options screen to 1024x800. And rewrites the pref.ini file so that the next time I start it the game start 1024x800. Weird. I have to manually edit the pref.ini file every time I want to start 2560x1024. Just Weird.
The anti-aliasing problem may be just because of the power of my ATI Radeon 256 x800 Dell Graphics card or the fact that I am transitioning from my LCD monitor to CRT monitor, but by reducing it to 0 the problem seems to go away. I have not tried it on the 1 to 5 settings yet.
Hope this helps.