I use Kodi with a touchscreen and wanted to hide the mouse cursor, but NOT disable mouse input. This can be done by using a 1x1 transparent PNG file as the mouse cursor. Find out what skin you're using and where your skin directory is. For me this is estouchy and its directory is /usr/share/kodi/addons/skin.estouchy. You need to download the PNG first:
Then move it to the skins media directory (or where ever the skin gets its cursors from):
sudo mv 1x1.png /usr/share/kodi/addons/skin.estouchy/media/pointer_1x1.png
Then edit the Pointer.xml file:
sudo nano /usr/share/kodi/addons/skin.estouchy/xml/Pointer.xml
And replace all "width" and "height" values with 1 and all "texture" values with the name of the 1x1 texture:
Now your cursor should be invisible.