Hmmm…
There does appear to be something profoundly wrong with the game’s handling of the mouse cursor. You may not be able to see this, but what’s actually happening is that when you move the mouse cursor it flickers on and off multiple times per screen refresh.
I will have to look into that. It’s not related to Special K’s “cursor hide” feature at all, though enabling the hardware cursor in Special K’s control panel can definitely help fix the problem the game is having.