Hi Barb
Since posting, my upgrade to Windows 10 came in and now everything appears to work fine! I can connect at the right resolutions and the connection seems stable with the Arc mouse connected, so looks like they've fixed it :).
It seems to be a little more sluggish to respond on the remote screen than it was before the upgrade, but it's no big deal for me as usually I mirror rather than extend the screen and am watching the screen on the surface to demonstrate something so lag isn't an issue. Of course, the surface screen has to match the 1080p resolution that way and for that reason I actually find myself wishing increasingly often that the Surface actually had a 1080p screen, but it's very good to have it working at last.