I am having this same exact problem. The highlight option is off and there is no cursor when recording, but when the video is viewed with mediaplayer there is a cursor over the games cursor. Sometimes it is the loading clock icon.
I would love to know how to fix this since I want to purchase this software, but if there is no fix for this I simply can't use it.
I'm also wondering if this might be something to due with the free version, I have heard about the watermarks and timestops and hopefully this is the issue so I am comfortable purchasing this software.
I would love to have an answer for this tricky question.
I am running xp64