it seems that chrome does not refresh the cursor while the mouse is down?
this works in firefox (if you change -webkit styles to -moz)
<?xml version="1.0" standalone="no" ?>
<g width="100%" height="100%" id="test_element"
onmousedown="document.getElementById('test_element').style.cursor='-webkit-grabbing'"
onmouseup="document.getElementById('test_element').style.cursor='-webkit-grab'"
>
<rect width="100%" height="100%" />
</g>
</svg>
to reproduce:
render above document
drag anywhere in document, notice that cursor does not change to grabbing
interestingly if you don't move your mouse and let go of the mouse button, it does change to the grabbing cursor until you move the mouse