Have you rebooted? I've just tried it and renaming the file and reboot definitely made the cursor appear. Renaming it back and another reboot made it disappear again. I guess restarting X would have been enough but who cares.

For some reason the cursor did NOT appear in the home screen though but it did in all apps.

What are you trying to achieve exactly anyway? There is a package - exmou - to support an external mouse. It will make the cursor visible as part of its job.