I am writing a small project where I would like to make use of drag and drop functionalty to ease some of the operations for the end user. To make the application a little m
You need to hide the default cursor and create your own window containing your custom image and then move that window with the position of the mouse.
You might also take a look at http://web.archive.org/web/20130127145542/http://www.switchonthecode.com/tutorials/winforms-using-custom-cursors-with-drag-drop
UPDATE 2015-11-26
Updated the link to point to archive.org's last snapshot