Xerox Park and display reasons aside, I think that the 2nd answer, with the picture of the hand is the best answer apart from historical and technical reasons.
For unrelated reasons it got me thinking of Mark Zuckerberg telling Joe Rogan how they left only the hand (and not the whole arm) in their VR, as it was enough.
> Is this a legacy thing or does a tilted cursor serves a purpose?
It's not just a question of historical fact. There's where it originated from. Then there are the documented reasons they first did it that way. Then the undocumented but plausible reasons it started that way. Then there are the reasons it has stayed this way. Those reasons aren't facts, they're counterfactuals.
Implicit in asking why the mouse cursor is like this is asking why it isn't a different way. If there was a better enough cursor, it would have won out. So all of its reasons of functionality, even the ones the inventor didn't think of or didn't matter historically, are part of why it is the way it is today.
Random thought.