I have updated to the latest GIT and it now works.

On Sat, Aug 21, 2010 at 12:46 AM, PCMan <pcman.tw@gmail.com> wrote:
LXAppearance does both of them at the same time to ensure that you
always have usable cursor themes no matter what WM you're using. Check
your ~/.icons/default. Changes won't apply to non-GTK+ programs till
next login.

On Sat, Aug 21, 2010 at 11:55 AM, Kaleb <djjsak@gmail.com> wrote:
> LXAppearance currently seems to set the cursor theme via this line in
> ~/.gtkrc-2.0:
> gtk-cursor-theme-name="FlatbedCursors.Blue.Large"
> However, there is a more universal method of setting the cursor theme--
> ~/.icons/default/index.theme:
> [Icon Theme]
> Inherits=FlatbedCursors.Blue.Large
> As it is, the current method of setting the cursor theme leaves the user
> with an inconsistent mouse pointer.