Is this possible? View photos in full screen and navigate using cursor

Neither. You simply need to learn to use your Mac. Don't expect it to work the same way as Windows, but also do not assume that it is less capable just because it works differently. Try reading here:

http://www.apple.com/support/switch101/

Also consider getting a book on using your Mac, like this one:

http://shop.oreilly.com/product/0636920014553.do

Then you need to start using photo management software, like iPhoto. The Finder is not, and should not be expected to be, a photo management tool, any more than Windows Explorer is.

Also, note that if you, as you say, figured all this out already and have just been leading me along, as I'm trying to help you, just to give you an increased opportunity to rant, that is not only not appreciated, it is against the terms of use of these forums.

https://discussions.apple.com/___sbsstatic___/apple/tutorial/tou.html

I thought you had solved it. Your step 5 seems to indicate that you had. Certainly, it is possible to view the images in full screen mode in Preview and navigate between them with the arrow keys. However, if you're still looking for a way to do it without using Preview, use Quicklook: select all the photos you're interested in viewing, then hit the space bar, then click the full screen icon.

If photo management is a big deal for you, you should consider using iPhoto, which should have come with your Mac (preinstalled in the Applications folder).

That is not what you described doing in step 5 of your original post, and there is no reason to expect that to work. You have only opened one single file in Preview, so there is no navigation to be done. If you select multiple image files and open them all at one time in Preview, as you described doing in step 5, then you can navigate between those images (and only those images) with the arrow keys.

fittan: In the Finder, select all the pictures you want to have access to. Open them in Preview. In the View menu, select Sidebar > Show Sidebar, then select Sidebar > Table of Contents. Click on the name of the picture in the sidebar list where you want to begin viewing. You are now able to use the arrow keys to move in either direction from that picture. The sidebar gives you immediate access to all of them, by filename or thumbnail image.

As Thomas suggests, it would be well worth your while to look at iPhoto — a tool for organizing, editing and filing your pictures, as well as viewing them flexibly. But like Preview, it doesn't work exactly the way anything in Windows has accustomed you to working, so you will need to learn it.

There is a feature in iPhoto that will permit you to accomplish your desired task. Select your images and import the into iPhoto. This creates an EVENT. Click on the Event. This creates a panel showing the individual pictures. Click on any Picture, it will show that picture in large scale. Press OPTION/COMMAND and the 'F' key and you are in full screen. Press those arrow keys left and right to your hearts content. Oh, and the curser is there!

Ciao.

You've slowly figured out that you can do exactly what you wanted to do all along, but you've still made up your mind that you prefer Windows. To each his own.

I just tested with a bunch of jpeg files opened in Preview, and in full screen, I was able to navigate using the arrow keys. So the question is, what are you doing differently?