Incredibly, I appear to have something new to add:

On my system (Karmic 64-bit), the problem appears when I enable System
-> Preferences -> Windows -> Select windows when the mouse moves over
them.

One additional data point: when my mouses passes over certain areas,
such as buttons, on a Flash movie, it turns into a hand pointer, to
indicate that I can click there I suppose. When the clicks are working,
the cursor stays a hand pointer while the mouse button is down. When
"focus follows mouse" is on and they are not working, the cursor changes
into an arrow pointer while the mouse button is down.

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Flash does not work correctly [READ DESCRIPTION]
https://bugs.launchpad.net/bugs/410407
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