Thank you for letting us know that this has been fixed. I'm guessing
that it is the new intel-driver 2:2.8.1-1ubuntu3 that did the trick
,since this adds two cursor related patches:
103_eliminate_cursor_flicker.patch and
104_kms_allocate_one_bo_per_crtc_for_cursor.patch. You may try to
downgrade to 2:2.8.1-1ubuntu2 to see if these patches is the reason why
it works now, but I guess the answer is only of academic interest.
Marking as Fix Released.

If anyone else than DenStore still has this problem ever with
2:2.8.1-1ubuntu3 (and otherwise an updated Karmic), please file this as
a new bug report with `ubuntu-bug -p xserver-xorg-video-intel`.

** Changed in: xserver-xorg-video-intel (Ubuntu)
       Status: Confirmed => Fix Released

-- 
Mouse offset 42px and 90° when in rotated display
https://bugs.launchpad.net/bugs/432963
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