You must use InteropServices for the GDI32 functions.

You may use the Windows function CreateIconIndirect
to create your cursor.

You must create 2 bitmaps.  An AND bitmap and
a XOR bitmap.

Creating the AND bitmap is easy.  It is a monochrome
bitmap where you set the color for those areas
that are transparent in your source bitmap and clear
the color for those areas that are not transparent.

The XOR bitmap is more work  Once you have
drawn your source bitmap and decided what color
you want to be transparent, you create a bitmap
to represent the XOR mask.  Copy your source
bitmap to the XOR bitmap using BitBlt(SRCCOPY).
Then you take your AND mask bitmap and copy it
to your XOR mask bitmap using BitBlt(SRCINVERT)
and finally take your AND mask bitmap and copy it
to your XOR mask bitmap using BitBlt(SRCAND).

You now have 2 bitmaps in the requisite format
necessary to create you cursor.  Use CreatIconIndirect
specifying the HBITMAPS that you created.

The following articles will provide background:

http://msdn.microsoft.com/archive/default.asp?url=/archive/en-us/dnargdi/html/ms
dn_transblt.asp

http://support.microsoft.com/default.aspx?scid=kb;en-us;318876