John points out that WPF/E's mouse event.X/Y are in the coordinate space of the browser plug-in, which can be pretty awkward to work with if your element is rotated, scaled, or otherwise transformed.  In February CTP, unfortunately there's no way of transforming the coordinates into the space of your choice, short of writing the matrix multiplication math yourself.  I ran into this as well while writing the slider control, it's definitely ugly, we plan to provide an API for this in a future CTP.