amkazak, you didn't specify what OS you're on, but I've only just done a test with an old MS mouse, like one of the first that had wheels, one identical to yours, and my trusty MS IntelliMouse Explorer. They -all- scroll just fine, so if I may hazard a guess? Re-check the wheel-settings in your control panel, or better yet, look into installing the IntelliMouse software (found
here). This does seem to be a hardware/driver issue, rather than a software shortcoming.
Hope this helps.