So this got moved from Accepted bugs to working as intended.

[CookieMonsta]

Hardware mouse doesnt register clicks at all when in full screen.

Your issue is very simple, once you click the software mouse control, your mouse is now slaved to the FFXIV software parameters. Normally this is not an issue but in your case, you are using DSR (thus problem is more of an NVIDIA thing), thus the screen space of your Windowed resolution was snapshotted.
My easiest recommendation is to go to full screen first under Hardware mouse mode then enable software mouse. Unplug and replug the mouse if you have to. When I get home, I can check out how to change the game settings with out logging in.