Installed a completely fresh copy of the game from this site and then I put the IE-DDraw files in the directory, but I still get the flickering cursor and slowdowns when I move it. This issue is quite a bit less noticeable when I lower the resolution, but it is undoubtedly still there. I also get massive CPU spikes whenever I move the cursor. I guess that's why the game slows down.
I also installed the DirectX9 components and updated my graphics drivers, but It didn't seem to make a difference.
EDIT: I even tried installing it on a virtual machine running XP professional. Oddly enough, the cursor issue is still there. I still get massive CPU spikes whenever I move the cursor.