I have seen this noted as a bug. I tried connecting a USB mouse via NM as a workaround and this failed. Any other suggestions?
Yes, the bug reference is here: https://www.nomachine.com/TR11K04024 and its fix should be available soon.
Is there an option to not mirror the physical display, and instead have a virtual display that is the size of my local monitor?
What you need is the Workstation for Linux. The virtual desktop functionality is one of the features of the Enterprise range: https://www.nomachine.com/product&p=NoMachine%20Workstation