This was tested using openSUSE 10.2
When the windowed option was set to 1 the cursor would also show with the game cursor underneath. This is because in main.cpp - glestMain() the showCursor function is setup like:
showCursor(config.getBool("Windowed"));
To fix this all I did was create another option in glest.ini and change Windowed to it.
showCursor(config.getBool("ShowCursor"));
showCursor is now independant of being Windowed.