In your XF86Config file, under the video device, the card itself, do you have an option for hardware cursor? You might want to turn that off, it might knock it out. Even if its not in there you might want to add in the line:
Code:
Section "Device"
Identifier "MATROX CARD 1"
Driver "mga"
VendorName "Matrox Graphics, Inc."
BoardName "MGA G550 AGP"
Option "hw cursor" "off"
BusID "PCI:1:0:0"
EndSection
Technically its slower, eating a little processor time that you won't notice much unless maybe in gaming, but it should get rid of that kind of problem.
Also, check to see that RH guessed your Mouse Protocol right, if its not just vanilla "PS/2" you might want to change it to that.
Cheers,