Comment 5 for bug 272334

I've figured out the proper way to permanently fix this issue using the documentation from here:
https://wiki.ubuntu.com/X/Config

Create a file named mouse.fdi in your /etc/hal/fdi/policy/ directory:
gksu gedit /etc/hal/fdi/policy/mouse.fdi

Then paste the following in there:

<?xml version="1.0" encoding="ISO-8859-1"?>
<deviceinfo version="0.2">
 <device>
  <match key="info.capabilities" contains="input.mouse">
   <merge key="input.x11_options.Emulate3Buttons" type="string">false</merge>
  </match>
 </device>
</deviceinfo>

Now you need to unplug your mouse, then plug it back in again / restart your computer (restarting X I think may also work).

Using "xinput -list", finding the number of your mouse (usually a number between 0 and 9, represented as <number>), then running:
xinput set-int-prop <number> "Middle Button Timeout" 8 0
Also works, but will not remain if you unplug then replug in your mouse / restart your computer.
So I recommend you use the mouse.fdi file above.