I have just found this page indicating the support for Silverlight mouse cursors:
http://msdn.microsoft.com/en-us/library/system.windows.input.cursor(VS.95).aspx
Is that it!!! :-| what are they thinking, at least there is stylish looking Eraser!
Is there aany other way to use custom cursors? How efficient/usable would it be to hide the cursor and show a png instead?