Rotating object using mouse movement

I've been trying to code a "physics gun" from garrys mod into my game, though i can't seem to get the object rotating right. So i want the user to be able to hold down "e" when an object is grabbed to then rotate it using the mouse. Based on an earlier question (http://answers.unity3d.com/questions/10443/how-to-rotate-an-objects-x-y-z-based-on-mouse-move.html) i found out how to achieve this though it simply doesn't work for me. Nothing happens... This is a rough script i wrote to try it out, what am i doing wrong? :)

 #pragma strict
 var speed = 5.0f;
 
 var toolEnabled : String = "physicsGun";
 
 var objectSelectParticles : Transform;
 
 private var selectedObject : Transform;
 private var trackObject = false;
 
 function Update ()
 {
     if (toolEnabled == "physicsGun")
     {
         //Raycast for the object we wish to manipulate
         if (Input.GetMouseButtonDown(0))
         {
             var gunHit : RaycastHit;
             if (Physics.Raycast (transform.position, transform.TransformDirection(Vector3.forward), gunHit) && gunHit.transform.tag == "Prop")
             {
                 //Enable the variable that is gonna alow for Update
                 trackObject = true;
                 //Make selectedObject date be = the data from raycast
                 selectedObject = gunHit.transform;
                 Instantiate(objectSelectParticles, gunHit.point, selectedObject.transform.rotation);
                 selectedObject.parent = transform;
                 //Make it kinematic
                 selectedObject.gameObject.rigidbody.isKinematic = true;
             }
         }
         
         if (trackObject == true)
         {
             //THIS IS WHERE I WANT THE ROTATING TO HAPPEN.
             if (Input.GetKeyDown(KeyCode.E))
             {
                 selectedObject.transform.Rotate(Vector3(Input.GetAxis("Mouse Y"), Input.GetAxis("Mouse X"), 0) * Time.deltaTime * speed);
             }
             
             
             if (Input.GetAxis("Mouse ScrollWheel") < 0) // back
             {
                 selectedObject.transform.position = Vector3.MoveTowards(selectedObject.transform.position, transform.position, 5.0f*Time.deltaTime);
             }
         }
         
         //Turn everything off again
         if (Input.GetMouseButtonUp(0))
         {
             trackObject = false;
             if( selectedObject != null)
             {
                 selectedObject.parent = null;
                 selectedObject.gameObject.rigidbody.isKinematic = false;
             }
         }
     }
 }
 
 function ToolHandling (string)
 {
     Debug.Log("Tool = " + string);
     toolEnabled = string;
 }