It looks like it locks up in the sun.awt.windows.WToolkit class... so the problem is probably in some native code. Short answer : you cannot use animated GIFs as cursors.
Long answer : you may be able to fake it by using either - a.) Multiple cursors and switching them with a thread. b.) Using a blank cursor and drawing your image at the mouse location on top of everything (glass pane in a Swing app.)
Both of these are just suggestions... I haven't really tried either out...
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