It's Fixed for Me
I entered a support ticket and got a response that fixed (sort of) the problem. Basically, you have to shut down Windows 7, go to >Virtual Machine>Configure>Advanced and switch the Smart Mouse setting to Auto (Mine was set to ON).
That fixed the scrolling problem, but now the mouse no longer moves seamlessly from the host to the guest operating system. You have to click once within the guest to get the guest mouse back from the host.
I don't like that, but for me it's the lesser of two evils. I told the support folks that, so hopefully they'll view this as a temporary work around and keep working on the problem.
One last thing, I was also told to check the box for "Optimize modifier keys for games" but that made no difference for me either way.