Only packets going through the same Cat 6500 where the IDSM is installed will be monitored.
In most situations that means just packets to and from the hosts directly connected to that switch.
But if that switch is connected between two other switches. Packets passing between those two switches that pass through the IDSM switch will also be monitored.
If you want to monitor all machines on the entire vlan on all of your switches you would need to use RSPAN. RSPAN, however, is only supported in the Cat 6000 (running traditional Cat OS and not native Cat IOS), and later versions of the Cat 4000, but not the Cat 3500.