I moused from the start. Brake, throttle and steer on the mouse and gears on the K/B. Doing the gears onthe K/B meant I had one hand fairly free to do the whole F12/F11 and hot key chat thing. I was predominatly a FZR racer. Mainly because I saw it as a challenge. Someone once told me that you can't mouse the FZR, I think a 1.41.57 AST. NAT and a 2.13.74 KY GP LONG kinda shows that you can . . . . There are so many things you can do to be able to 'aid' you in your mousing. Some that have already been mentioned, but;
In windows, bring down your mouse speed and take of any acceleration you might have optioned. LFS takes it's mouse settings from windows.
Reduce steer centre reduction as much as you can. This again makes your steering inputs less severe as it takes off any wheel turning acceleration. (Also reducing the steering rack in the car setup will give you more control)
Race in Cockpit view (I would have thought that was a given) you need to see the steering wheel to judge turing input.
Take off any throttle and brake help you have on, it just gets in the way of you being able to set up your car correctly.
Which brings me too setting up, don't be afraid to change your setup. You can make the car far more sympathetic to mouse inputs if you change a few bits and peices on the car.
For starters, if you find exiting corners difficult with putting the power down with your digital input then there are a number of things you can look at. Lengthen the gear ratios for any given situation, spinning up in second exiting a slow hairpin then lengthen that gear untill you gain some control back. Increase the toe-in, I ran the FZR between 2-4 degrees, this will again increase the power on grip you have on corner exit. Soften the suspension, if you inherit setups from other racers then they will probable be wheel users, they can run their suspension alot harder than you will find comfortable. So try reducing the overall hardness to give you a softer feel. This allows the car to move around more and you have more margin for digital inputs to move around with. Er, anything else for power on . . . . . . reduction in tyre pressures, again the harder the pressure the more the car will figit and squirm, not good for mousing. Soften the pressures and the car can settle and allow some leeway with the digital inputs.
Braking. . . . I found that by having the front suspension set soft and lower tyre pressure (Although less so with the new patch) you can get away with alot more brake power than you think. The gears are also critical in helping you brake, if you are using an auto box I have one word . . .DON'T!! A small note about the tyre pressures though, try and keep the pressure front and rear as near as possible to each other. Have to much of a dyscrepancy and it can seriously effect the handling characturistics, tyre wear, temperatures and many other things. I notable found that having the rear pressures higher than the front would seriously unbalance the car on braking, making the rear bounce around and step out. Also dont be afraid to ramp up the downforce, it's a great settler for the car paricularily when you are playing with setups. Once you have things sorted you can slowly reduce the downforce untill you are on the edge again but then by then you will be adjusting everything else again.
These are just a few things that I took on board and worked into the car. Made me very competative but I also knew I would always struggle against wheel users, but I could still give them a run for their money.
) is the RAC, FZR and the FO8, I use a laser mouse which has somewhat seen my temper in the past and I think it's damaged a little, because it does have the tendency to jump about and cause me to crash. I don't fair well at racing but drifting I think I'm quite good at, despite people saying drifting with the mouse is hard 
it's not That hard... 
and the buttons for upshift and downshift also middle is my handbrake if im drifting or its my pit limiter if im racing 
