This got me thinking. A modern ball mouse utilizing some kind of optical tracking on the ball could be very accurate. Of course, probably less accurate than tracking on the desk itself, but would be fun as a "retro-style" novelty.

I do believe Microsoft and Logitech have built mice that had optical tracking of the ball but went to direct tracking of the surface because of cost, cleaning, and accuracy.

That's how modern trackballs work. Optical mice are cheaper to produce and more reliable than those with balls, and trackballs are the same in that regard.