I've had this issue with Oblivion, wherein the top left of the screen will show the windows mouse at the top left of the screen, and this screws up the mouse and if I click when it is over this small area it will go to desktop. This doesn't change at all whether or not my secondary monitor is hooked up. Of course, when I switch out of the game, no matter what workarounds are available on the internet, it simply will not come back up.

My setup is
Nvidia GTX 260 C216 65nm (drivers 270.61)
AMD Athlon II X2 240
http://www.ecs.com.tw/ECSWebSite/Product/Product_Detail.aspx?DetailID=892&CategoryID=1&MenuID=20&LanID=0
Windows 7 SP1 Ultimate 64 bit
1600x1200 monitor
Latest patch, I've installed the unofficial patch but it doesn't change anything relevant

Oblivion doesn't share well.... If you switch priority away from it, a crash is almost guaranteed.

That said..... First, if the windows sidebar is over in that area, turn it off before starting the game. You might be able to just go into the properties dialog window for oblivion, (right click on the oblivion.exe, and select properties, or personalize, as the case may be.) Turn off Desktop themes, run in XP compatibility mode, and something about composition that I just can't remember the exact phrase for at the moment. Run as Admin doesn't hurt either.

Sidebar? I don't use vista, I use 7. 7 doesn't utilize the sidebar. Secondly, I don't use any of the "gadgets" that come with 7, so it's a non-inclusion.
As far "composition" you mean desktop composition, in which that is one of the things I've tried which doesn't work. I don't need to run in admin as everything I run is already in admin automatically, because UAC is disabled.

Got xfire, or something similar running in the background?

If you have X-Fire, there is a way to have it running with the game:

1. Go to "Program Files\Bethesda Softworks\Oblivion" or whatever OB install directory you have
2. Right-click on Oblivion.exe
3. Go to "Properties"
4. Select the "Compatibility" tab
5. Check the box "Disable Visual Themes"
6. Click "OK"


Also, may want to try editing the .ini file in your My Documents\My Games\Oblivion folder....it is the configuration settings file called Oblivion. Do a CTRL+F to serach for this line:

bBackground Mouse=0

if it says 1 instead, change it to 0.

Uhm, Xfire doesn't really cause this issue( it happens with or without ), but these two applications fixed my problem.( sort of, now it's just moved from 5 or so pixels down to 2 pixels sporadically diagonal across the monitor that doesn't really affect me )