I have the late 2009 model of 27" iMac, my Magic Mouse works fine under Windows 7.
It didn't support scrolling out of the box though, I had to install bootcamp software from the application disc that comes with my iMac to get it working.
Try getting only one pointing device to work at a time. Turn the Magic Pad off and see if the mouse will work? My Magic Mouse was working WAY BEFORE the Windows 7 install was completed. It worked during the install process and I was able to navigate with it to complete the installation. Your experience does not seem to be the norm.