This might be a bit of a niche case.
Just for shiggles I paired my bluetooth mouse to my phone and tried flying with it in VO. It works.. sort of. The game doesn't seem to "grab" the mouse pointer like it does on Windows/Linux/Mac so you can only steer until the pointer hits the edge of the screen.

This device is so totally unsupported:
Motorola Droid (Mk1)
CyanogenMod 7.1 (Android 2.3.7-based)

Doesn't grab the mouse from an Asus Transformer either, but it's more to do with the way Android implements mouse. Mouse movement is interpreted as touch screen events. Or something like that.

It is currently impossible to completely grab the mouse on Android, or to implement a "mouselook" like we do on PC (or how every FPS is played). This is an unfortunate situation that we hope will be improved someday, but have no solution for at the moment. We're not the only ones who have tried, and we've spoken directly to Google about it (Input Framework team at Android), without much success.

Ah well, I figured it wouldnt hurt to post about it anyways. :)

Did Google say it's impossible? Or they just didn't answer? If the problem is on android's side, could they tell us what needs to be changed (so that at least we could ask the authors of custom roms or programs for rooted devices to implement those changes). It would help a lot for a few games and programs! And the community could work on it so that you don't need to waste ressources on that. Thanks!

It's on Android's side, due to how pointing-devices are handled when they hit the screen edge. One major chip company has filed a bug about it, and told me they're going to implement a solution of some kind. But, I don't know when that will be ready, or if/when Google will choose to integrate the change into the mainline OS. It really needs to be in the main OS before game companies can spend the time to support it. Custom roms are great, but don't have the market share to justify the development costs for specialized support.