I`ve had this happen 3 times in the past year, also running XP. First time was in an alternate shot game...and couldn`t even tell the others the problem because the cursor was frozen so I couldn`t click on the chat box.
I use a cordless mouse so I tried the on/off switch, changed the battery, etc.. I finally remembered to try my spare/back-up Corded mouse. As soon as I plugged it in to a USB(3 spare in the front) and moved the cursor, my cordless worked again.
I have no idea why this happens or why it works to plug another mouse in. Ice dragon, Iron, and Comodo...no difference. The only factors that match are: XP and WGT.
Solution= plug another mouse in...Hope this helps ;-)