I was going to try to live with this problem, but I just bought Super Mario Galaxy and it is affecting that game as well. When I use the pointer to collect stars and such, it flashes and is generally kind of erratic.
I have tried setting up the system in another room here in my apartment and at my folks house when I was home for Christmas, but I get the same issue.
I called Nintendo support a second time to see if I could get a more helpful tech, but after she asked me to try everything that is online and in the manual she said I should try posting in the nintendo support forum!
Is there any way to reset the firmware without losing the VC games I have bought? I have an SD card but I am really unclear as to whether or not his is possible.