Are we able to observe a delay of 32 ms when using a mouse and looking at the screen/cursor?

Yes. I used to work for Atari Games. Kids reaction times are so fast that they can sense a lag greater than or equal to two fields. That's 33.33 ms. So all fighting games were designed to read buttons and joysticks on one frame and change the motion of the character in the next frame. Anything slower was panned by players (except Virtua Fighter which compensated for its six-ish frame lag by being fun in other ways)

Frame lag, as its called, is really frustrating when playing games, but wait, everyone on Reddit who plays network games should know that, right? "Oh look I've been dead for 128 milliseconds, this sucks, MOM I WANT FIOS!"

I can't speculate on the specifics of human reaction time, but 32 milliseconds is 2 frames in a game running at 60 fps. Or it's one frame in a game at 30 fps.

My personal experience is that input delay like that would be pretty easily noticeable, especially for someone who isn't used to it who tried playing a game on Mac. But to get an accurate test, I'd need to try the same game on the same hardware with the same mouse acceleration curve, and only vary the input delay. If anyone knows of a way to add 32ms mouse lag on Windows 7 I'd be glad to give it a go.

Vsacue Just talked about this http://www.youtube.com/watch?v=BTOODPf-iuc&feature=g-u-u&context=G2c88245FUAAAAAAAEAA

I'm pretty sure that we can observe a delay way lower than 32 ms. At least as a gamer. I've had a issue with CoD Black Ops, where my mouse input was slightly delayed. I'm fairly sure the delay was way under 100 ms, but it was still annoying as hell.
Also, when a program uses a software cursor, the cursor will often update with 1 frame delay. Let's say the framerate is low, at 30 fps, then we have a 33ms delay, and this is pretty obvious.

As I stated on that post, we have the ability to see very brief stimuli. This is tested by presenting a visual target that appears for just a few milliseconds. This was originally done using a mechanical device called a tachistoscope. Presentations of around 5 ms have been shown to contribute to visual acuity. 32 ms is practically frozen in time by comparison.

Yes, a 32ms delay would be quite noticeable in many computer applications - especially fast-action games.

Consider a game where you're trying to click on (shoot, select, whatever) something on a virtual object moving at 60 mph.

60 mph = 26 meters/second;
60 mph * 0.032 seconds = 0.85 meters

so 0.032 seconds of lag will mean being almost a meter off target.

This is somewhat related: In automotive design, one of the key attributes for what we call driveability (the drive quality of the vehicle), is the delay between the driver actuating the accelerator pedal, and experiencing acceleration on his body via his seat. A complicated set of instrumentation is used to measure this time, and it will range from 200ms in a not-fantastic vehicle, to 60ms is a highly tuned electric vehicle. A 200 ms delay is actaully quite a long time when you think about it, or experience this phenomena, and the mechanism causing it (at least in conventional vehicles) is due to throttle opening delay and air flow propagation delays through the intake and into the cylinders - mostly airflow-related issues (mass transfer takes time). Also at play is transmission delay time to spin up the torque converter if the vehicle isn't moving, or if at highway speeds, to first unlock the torque converter before any shifts (if shifts are required). Obviously, electric motors dont have any of these issues (no air flow transients, and no multi-step transmissions), so the response is significantly better.

FYI: 50ms response from a vehicle would be extremely fast, but definately identifiable by someone looking for it, and easily identifiable by a driveability engineer.

I've tried playing games on my TV, the lag was unbearable.