Cursor change when rollover hotspots

I have followed this tutorial:
http://www.spoono.com/flash/tutorials/tutorial.php?id=23

and have created a pencil movieclip that should change when I roll over different hotspots but it isn’t working, could someone please take a quick look and tell what I’m doing wrong?

Also the pencil attaches to the wrong point of the cursor, its well above the pencil tip!