This is how it works on C2500 (which has only one screen, so not sure how it translates to C3500):
If the external screen is mirrored, then the mouse pointer shows up on both screens, and works on both. But of course you only have the one view available.
If the external screen is not mirrored, then the mouse works only on the external screen.
The keyboard, on the other hand, is available any time there is a field that accepts typing, no matter which screen it is on.
Since there is only one USB port on the C2500, connecting both requires a USB hub.