There are strict limitations on what kind of image can be used for a cursor.
1: it cannot be bigger than 128x128
2: it will not take in to account any properties (such as angle, opacity, being resized other than 1:1, any blend modes, etc etc). It will simply use what you see in the image editor as the cursor.
3: it won't work in Internet Explorer at all
4: it may not work on operating systems other than Windows
Since your image is bigger than 128x128 it fails to load. Resize it down in the image editor to something smaller and it works, at least on Windows 7 with Chrome or Firefox.