I have very similar issue, I need to use hardware cursor because my game is RTS and software cursor is too laggy. So I enabled “show mouse cursor” and these are my issues:
1.) Game windows has focus only when I click, immediately on release game windows lost focus. This means I can use free look only when holding button.
2.) Cursor is not locked in game viewport. It can go out of game windows easily and that is not good for me because I need to pan map when cursor is near edge of window.
Set Input Mode node seems to do nothing. Tried all nodes and all settings.
Btw. Feature request: It would be good to give better options and change variable naming. I belive it should not be named “show mouse cursor”, maybe it should be something like “enable hardware cursor”