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Dose anybody know if there is a way to replce the mouse with a sprite, I want the player to be able to control a small character that interacts with the enviroment, light torches by clicking on them, click and drag puzzle items, cut ropes by clicking them, etc.

I tried the "click through" method where you make a sprite with a hole in the middle to allow the mouse to click through the sprite, but it seems like the mouse "grabs" the sprite on the closest solid spot to the center.

You can use the "Change Cursor" action.

Or

1) Make an actor follow the mouse with the "Follow Mouse" action
2) In the "Create Actor" event disable the mouse down event with "Disable Event" action
3) hide the default mouse in the game properties