The cursor is there, it just doesn't physically work. If you click on any buttons, links, menu bars, sources, etc, it doesn't do anything in cydia.
Other things I've found:
If you click disconnect in the actual bt mouse application it doesn't work with the mouse, you have to manually click.
It does work with sbsettings and my background app.
Upon further investigating, it doesn't work for any apps. It will launch the app from the springboard, works with folders, etc. Once the apps launch, it is useless, even in safari or mail.
At this point, I cannot suggest using it as hardly anything works correctly.