Input grabbing on Wayland doesn't currently work as expected. Destkop environments based on the X session manager may work better in this regard
There are multiple ways to share an input device with a virtual machine.
Event device or simply evdev is a generic input event interface that is part of the Linux kernel.
The following is an XML snippet example for sharing a mouse and a keyboard.
<input type='evdev'>
<source dev='/dev/input/by-path/platform-i8042-serio-1-event-mouse/'>
</input>
<input type='evdev'>
<source dev='/dev/input/by-path/platform-i8042-serio-0-event-kbd' grab='all' repeat='on'/>
</input>
Replace the platform-i8042-serio-1-event-mouse value with the value under /dev/input/by-path/* or /dev/input/by-id/*
If there are multiple possible options, the input device has to have event in the name.
sudo cat /dev/input/by-path/pci-0000:09:00.0-event-mouse
��c $
��c���c���c�$��c�$��c��c��c
��c 3
��c����c����cd���cd���c�2��c�2��cz��cz��c�Q��c�Q��c����c����c����c����cda
��cda