One thing I forgot to mention - I get mouse trails when in Workbench in Picasso96 screenmodes that have 32bit colour depth. They don't occur in 8bit mode.
Did you copy new rtg.library to libs:picasso96 overwriting the old one? (comes with winuae, not sure if it comes with euae)
It also has some transparency optimizations etc.. when using 32-bit modes.