Lol, now that would be a sight, no pun intended You could use newspaper but the problem is the live mouse will run all over so I doubt it will stay on the newspaper. Now if your snake is like my redtail boa, you can let her grab the mouse and constrict it, then move her upper half with the mouse onto the newspaper. Newspaper is better imo than paper towels for feeding on as the newspaper is stiffer and stays flat while paper towels like to ball up and stuff and if it smells like a mouse, the snake might try to eat that with the mouse.

Cypress mulch should be fine. I never used it but I was always afraid there might be some prison shanks in there in the form of sharp long splinters but again I have never personally used it. I use Zoo Med finely shredded aspen. Its more expensive but its really soft and packs down nicely.