It looks like it locks up in the sun.awt.windows.WToolkit class... so the problem is probably in some native code. Short answer : you cannot use animated GIFs as cursors.
Long answer : you may be able to fake it by using either -
a.) Multiple cursors and switching them with a
thread.
b.) Using a blank cursor and drawing your image at the mouse location on top of everything (glass pane in a Swing app.)
Both of these are just suggestions... I haven't really tried either out...