Pretty smart once you figure out how it works. Wonder if there's some kind of advanced click-jacking attack you could achieve with a technique like this.
I was thinking about this. You can accumulate the position difference and trick the user into clicking anywhere. I'll try to do that right now and update the demo :)
Use in clickjacking - unlikely. Once your mouse is on another iframe you have no power over cursor pic.
I expect if the iframe is small enough you could trick the user into clicking a small button as they'll click before they realise. Even if they notice, I bet many users would just click anyway after being briefly confused and put it down to a bug.
All that can be done with transparent iframes, cursor tricks achieve nothing.