Steve,Since you are adding a highlight graphic to the map's graphic layer listening to the map's graphics onMouseOut event instead of the feature layers should remove the flicker.
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01//EN" "http://www.w3.org/TR/html4/strict.dtd">
<html>
<head>
<meta http-equiv="Content-Type" content="text/html; charset=utf-8"/>
<meta http-equiv="X-UA-Compatible" content="IE=7" />
<!--The viewport meta tag is used to improve the presentation and behavior of the samples
on iOS devices-->
<meta name="viewport" content="initial-scale=1, maximum-scale=1,user-scalable=no"/>
<title>FeatureLayer On Demand</title>
<link rel="stylesheet" type="text/css" href="http://serverapi.arcgisonline.com/jsapi/arcgis/2.2/js/dojo/dijit/themes/claro/claro.css">
<style>
html, body { height: 100%; width: 100%; margin: 0; padding: 0; }
</style>
<script type="text/javascript">djConfig = { parseOnLoad:true };</script>
<script type="text/javascript" src="http://serverapi.arcgisonline.com/jsapi/arcgis/?v=2.2"></script>
<script type="text/javascript">
dojo.require("esri.map");
dojo.require("esri.layers.FeatureLayer");
dojo.require("dijit.form.Button");
dojo.require("dijit.Dialog");
var mapLayers = []; //array of layers in client map
var map;
var highlightLayer;
function init() {
var extent = new esri.geometry.Extent({"xmin":-96.6063,"ymin":38.3106,"xmax":-96.4764,
"ymax":38.3689,"spatialReference":{"wkid":4269}});
map = new esri.Map("map", { extent: esri.geometry.geographicToWebMercator(extent)});
dojo.connect(map,"onLoad",function(){
highlightLayer= new esri.layers.GraphicsLayer();
var highlightPoint = new esri.symbol.SimpleMarkerSymbol(esri.symbol.SimpleMarkerSymbol.STYLE_CIRCLE, 12, new esri.symbol.SimpleLineSymbol(esri.symbol.SimpleLineSymbol.STYLE_SOLID, new dojo.Color([255,144,0]), 1), new dojo.Color([255,144,0,0.25]));
highlightLayer.setRenderer(new esri.renderer.SimpleRenderer(highlightPoint));
dojo.connect(highlightLayer,"onMouseOut",function(){
map.setMapCursor("default");
highlightLayer.clear();
});
map.addLayer(highlightLayer);
});
var imagery = new esri.layers.ArcGISTiledMapServiceLayer("http://server.arcgisonline.com/ArcGIS/rest/services/World_Imagery/MapServer");
map.addLayer(imagery);
var content = "<b>Pop</b>: ${POP2000}" + "<br /><b>Households</b>: ${HOUSEHOLDS}";
var infoTemplate = new esri.InfoTemplate("Census", content);
var featureLayer = new esri.layers.FeatureLayer("http://sampleserver1.arcgisonline.com/ArcGIS/rest/services/Demographics/ESRI_Census_USA/MapServer/0",{
mode: esri.layers.FeatureLayer.MODE_ONDEMAND,
outFields: ["*"],
infoTemplate: infoTemplate
});
map.addLayer(featureLayer);
map.infoWindow.resize(150,85);
dojo.connect(featureLayer, "onMouseOver", function (evt) {
map.setMapCursor("pointer");
highlightLayer.clear();
highlightLayer.add(new esri.Graphic(evt.graphic.geometry));
});
}
dojo.addOnLoad(init);
</script>
</head>
<body class="claro">
<div style="position:relative;width:100%;height:100%;">
<div id="map" style="border:1px solid #000;width:100%;height:100%;"></div>
</div>
</body>
</html>