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Looks like the update has fixed it.

I think OS X 10.5.4 update fixed it. I'm not sure, but its been a while since this problem has plagued me.

This appears to work, but the computer needs restarting afterward. Going to test it out more before I consider it a fix. – Heath, on June 18, 2008 01:58

I have the flickering mouse issues. When I am in Photoshop in 1 space, and switch to another, and back, I get the stupid flickering cursor... and have to restart Photoshop completely...

Update; I tried the scripting directory fix.. well, it didn't fix it. I did get the 10.5.3 update.

This did not fix the problem for me. – Staggs, on June 17, 2008 17:11

So the 10.5.3 update changed this problem, but not fixed it. The palettes don't really dissapear anymore, they're just blank... you still have to double tab to get it all back.

The save for web window no longer dissapears which is useful.

Still not fixed though. Going to try the script thing above.

WORKING FIX FOR THIS PROBLEM:

1) Under your Photoshop folder, go to /Scripting Guide/
2) Right click Sample Scripts, Add to Archive
3) Delete original Directory
4) Restart application
5) No more flickering mouse cursor or palette reset issues! :)

It seems to come from a conflict when grabbing information about object/palette state for scripts for some forms of Javascript. Provided none of this particular type are active, you don't have this problem.

If you use scripts a lot, this might upset you but from what I can tell, it only affects the Sample Script directory.