MSDN has a fairly nice article about how to create an alpha-blended mouse cursor in Win32.
You can read the article at http://support.microsoft.com/kb/318876.
The long and short of it is that you create a BITMAPV5HEADER structure to describe your bitmap, then you call CreateDIBSection to create a DIB to hold it, then copy your pixels in, and bam, it works.
Well, most of the time. ... read more ...