Please insert in /etc/X11/xorg.conf in the section "Device" the following line
  
  Option "SWcursor" "true"

Please use a multi-monitor configuration with different display addresses (:0.0, :0.1, ...) with at least 2 screens.

There will be only one screen which everything will be ok on (mostly :0.0 but not always) but the other screens will show the following problem:

If you move the cursor, the window content lying beneath the cursor will not be restored correctly.
It seems that the content of the window that lies at the origin of the root window is always used to restore the window content that the cursor has passed over (like XCoypArea()), independently from the actual cursor coordinates which seem to get lost or replaced by (0, 0). The cursor move will leave behind
a track of pixmaps taken from the (0, 0)-pixmap.

The error occurs on Ubuntu 10.04 with X.Org version 
"X.Org X Server 1.7.6 Release Date: 2010-03-17 Build Operating System: Linux 2.6.24-27-server i686 Ubuntu"
and also on OpenSuse 11.3 with X.Org version "X.Org X Server 1.8.0 Release Date: 2010-04-02"
I think that means both use Xorg 7.5.

The error occurs e.g. on HP-Z400 with graphics card Nvidia NVS 450 and
with 2 or 3 connected screen, each with a size of 2560x1600 pixels.
The error also occurs with graphics card Nvidia NVS 295 and with 2 connected screens with a resolution 0f 1600x1200 Pixels.
Since the error will not occur on OpenSuse 11.3 if an older xorg version <= 7.2 is used,
it is obviously a bug in the Xserver itself and not in a driver.
As the bug appears at least on Ubuntu and Suse Linux, it is widely spread and does not seem to be
restricted to the above mentioned hardware configurations.