There is little or no reason to disable SmartMouse, if it's disabled you have to click inside the Virtual Machine (VM) area for the cursor in the VM to respond, with smartmouse enabled whenever you hover your cursor over the vm area it becomes the vm cursor.
SmartMouse only works if Parallels Tools are installed on the VM.
And yes, the mouse cursor in full screen mode should work.
Last edited: Nov 30, 2011