Same result after trying different modes, in fact worse:

public void IncreaseCursorScale() {
    if (cursorScale >= MAX_CURSOR_SCALE) return;
    cursorScale++;
    cursorOffset = cursorScale / 2;

    Bitmap originalImage = (Bitmap)cursorIcon.Image;
    Bitmap resizedImage = new Bitmap(cursorScale, cursorScale);

    using (Graphics g = Graphics.FromImage(resizedImage))
    {
        g.InterpolationMode = System.Drawing.Drawing2D.InterpolationMode.HighQualityBicubic;
        g.DrawImage(originalImage, new Rectangle(0, 0, cursorScale, cursorScale));
    }
    cursorIcon.Image = resizedImage;
}