what is actually happening

Over a photograph — the halo is a plain white disc. The whole cursor layer carries mix-blend-mode: difference, so the disc is not drawn on top of the picture; the picture underneath it is recomputed as |photo − white|, which is the negative. Move off and the arithmetic stops. Nothing was ever painted.

Over video — two things fire at once. The halo becomes an acid play mark knocked out of a disc, and an acid panel drops over the tile in difference, so every frame becomes |frame − acid|. It arrives on steps(2) with a three-step jolt on the video itself. A smooth fade would make it feel like a UI. It should feel like something tearing.

One blended layer — the cursor is a single fixed full-viewport element carrying one blend mode, with the core and halo riding inside it unblended. Two adjacent composited layers that each carry a blend mode leave a hairline seam where they meet. This is the same failure that put phantom borders through the Cargo build.

Isolation, used correctly — every tile is isolation: isolate, which keeps its rip contained instead of leaking across the page. That is the exact property that severed the blend modes in Cargo — it is not the enemy, it was just in the wrong place there.

Dodge — the study lets you switch the cursor to color-dodge. Worth seeing what it does on the white page: nothing. Dodge divides by the inverse of the source, so anything dodged over white returns white. It only comes alive over the pictures. Difference and exclusion have no such hole, which is why difference is the default here.