Yeah, it's a corrupted game. A complete uninstall/reinstall *may* fix it.
The cursor.nif file is is on the Construction Set CD (it's a 640 byte file) so you can *try* copying it from:
(using F: as CD drive - change as needed)
C:\Program Files\Bethesda Softworks\Morrowind\Data Files\Meshes
That will put a hard copy on the drive and the game should find it automatically when it runs again. If not, then you'll have to resort to the uninstall. Essentially, the file should be resident in memory when the game runs, but in your case, it's just not there. Try my method to "trick" it.