how to make my cursor better?

First off, you didn't do anything "wrong". The first is the hardest. Keep pluggin' away. Have fun!

A couple questions:

What format are your original images?
What resolution are you original images?
Do you resize from larger images?

Answer these and I might be able to help you out further.

Thanks for the help Mr. Cross.

The images were in .psd from photoshop, but saved as a .bmp before that.

I don't know what the resolution was.

And I did resize from larger images.

First off, I would use PNG format. It anti-alaises nice and has 256 levels of transparency. This brings us to the Alpha Channel. Since you are using Photoshop get familiar with layers and channels. There are many tutorial sites that have tutorials for basic to advanced procedures in Photoshop. Here are a couple---> http://www.photoshopcafe.com http://www.pslover.com/ http://www.photoshoproadmap.com/

Second, increase your resolution (dpi) on your original images before you resize them down. This will make your edges and color-blending smoother at the smaller size. Remember: graphics programs work with pixels. The more pixels/inch it has to work with the more precise the image will be.

Experiment...experiment...experiment! You'd be surprised how many techniques I figured out by accident.

Lastly, have fun! If it's no fun it's not worth it!

I hope this helps you out. If you need any more help/testing let me know!