For whatever reason, the X-Arcade is extremely finicky about what adapters it will behave with. Thinking I was a real sly devil, I tried buying a couple different brands of PS/2 to USB adapters that were cheaper than the one offered officially, and found that in every case, the thing just didn't work. At all. The red light would come on, but nothing was being sent between the board and the computer.
My only remedy thus far has been to get an official adapter, and even this one has its quirks. I get intermittent sticking problems, though not as frequently as I did with the Y-Mouse (which is the old peripheral they used to sell with the X-Arcade... it sucked, but it sent data through).