I have downloaded the game and am running it in VDMSound. (DOSBox wouldn't install on my computer) However, I have an issue with the mouse. I cannot move the pointer past a certain point halfway through the screen, and have to move around the menu with arrow keys, a process that is very slow and frustrating. Is there any fix for this?

Sorry to be a spoiler
 

Sorry to be a spoiler about a free game but are there any versions with the sound or is the sound available for download?

a question
 

What file do I need to open in order to run the game>?

C2.bat, or from DOSBox you can safely run PS.exe instead

How to fix the sound
 

I downloaded the game from this site and ran it on dosbox, but didn't have sound. In dosbox, I mount the game directory to c, and type c2 to start it. From that same directory in dosbox, type "setsound" instead of c2. This will run the sound wizard. I selected soundblaster for both midi and digital audio, and now I have Caesar2 with all the glorious (though sometimes annoying) sounds.

A couple other tips for dosbox, you can edit the configuration file so that it automatically mounts the game for you. In windows 7 the file is at c:\users\<your username>\appdata\local\dosbox\dosbox-<version>.conf . If you can't see the appdata folder, click on the c drive, then click the Organize dropdown on the top bar of windows explorer, select "folder and search options" and check "show all files".

At the bottom of the dosbox conf file there is a section to put in commands for the program to run automatically, put your mount commands there and you won't have to keep typing them.

Alt and enter toggle between fullscreen and windowed.

Ctrl-f11 slows down emulation, ctrl-f12 speeds it up. By default it's 5 percent of up or down, but if you change the dosbox configuration file cycles setting from auto to a number (I found 10000 to be good) you can set ctrl-f11 and ctrl-f12 to increase/decrease by a number of cycles (I picked 1000) instead of a percent.

Hope this helps