If your hotspot is a flash file and you embeded some mouse interaction in it, then it is very possible that it conflicts with krpano own mouse event handler and leads to unexpected bahavior.
My tip here : if the arrow is static then no need to do a flash file, just a png. If you want the glow effect on mouseover you will have to dig into xml krpano code : something like
url="my/normal/hotspot/file.png" onhover="set(url, my/glowing/hotspot/file.png)" onout="set(url, my/normal/hotspot/file.png)"
I recently played with this new property : the crop
url="my/double/hotspot/file.png" crop="0|0|65|65" onovercrop="0|65|65|65"
Given that my/double/hotspot/file.png is a 130x65 png file where the upper 65 pixels are the normal spot representation and the lower 65 pixels are the hovered hotspot representation.