All,
My experiment failed. With a setting of level "1" in the "Vibration/Sound" setting in the "Arc Touch Bluetooth Mouse" app, scrolling stopped working on Wed 15 Jul at 11:59 am.
I now turned off Vibration/Sound altogether, and will post again once scrolling fails to work again, which I'm pretty confident that it will.
I'm convinced that this is a hardware flaw, as other posters have suggested. It's difficult to believe that a mass-marketed mouse by Microsoft could experience this failure for years, without anyone at Microsoft taking any notice and at least acknowledging the problem.
Thanks,
Steve