I'm not clear on what this means. Does it mean that the mouse cursor doesn't get updated by the renderer?

Re #1: Yes, cursor doesn't get updated on links, text boxes, etc.

The following revision refers to this bug:
  https://chromium.googlesource.com/chromium/src.git/+/6071fe20d749ff6ebde0da65c5e3f6fd83065cb9

commit 6071fe20d749ff6ebde0da65c5e3f6fd83065cb9
Author: avallee <avallee@chromium.org>
Date: Thu Mar 31 03:27:11 2016

Fix <webview> cursors with --site-per-process and --isolate-extensions.

When running BrowserPlugin without either flag, the guest sets the
cursor which is forwarded to the embedder. The embedder saves the
current guest cursor and will set the cursor to the guest value when
processing mouse events for the guest.

When running with either --site-per-process or --isolate-extensions, the
embedding renderer no longer receives the guest's mouse events which are
how the cursor ends up being set. In this case, directly set the cursor
with the owner view.

BUG= 595446 
CQ_INCLUDE_TRYBOTS=tryserver.chromium.linux:linux_site_isolation

Review URL: https://codereview.chromium.org/1845083002

Cr-Commit-Position: refs/heads/master@{#384193}

[modify] https://crrev.com/6071fe20d749ff6ebde0da65c5e3f6fd83065cb9/content/browser/frame_host/render_widget_host_view_guest.cc