question

You are correct. FlexSim reads the raw input values of the 3D mouse directly and bypasses any settings that may be set in a driver or other program. Since the code that interprets the input for a 3D mouse is hardcoded, the easiest way to flip both axes is with a module. I created this small module awhile ago that should do that:

mouseinvert.zip

All you need to do is unzip the folder and place it in the modules folder for FlexSim. The modules folder can be found in the installation directory for FlexSim. So for the 64-bit version of FlexSim 2016 Update 1, the default location for the modules folder can be found at:

C:\Program Files\FlexSim 2016 Update 1\modules

Just be sure that the structure of the modules folder looks like this after unzipping the file:

C:\Program Files\FlexSim 2016 Update 1\modules\mouseinvert

Where mouseinvert contains 2 files: mouseinvert.fsx and mouseinvert.t.

After unzipping the folder and placing the mouseinvert folder in the modules folder, you should be able to open FlexSim (or close and reopen if it is already opened) to find the 3D mouse is inverted.