I've thrown away half a day trying to figure out how to get the scroll wheel to behave. No cigar. It still scrolls one line at a time in a terminal, and two pages at a time in firefox.
Also try reducing mousewheel.min_line_scroll_amount if changing the other setting doesn't help. Try a value of 16.
The default is 100, which seems to work fine most of the time, but for the OP's issue, reducing it by a factor of ten might be a good starting point.