This game reminded me of Trader of Stories a lot, and that's a good thing. If it were longer, I would definitely say it's at least in that echelon.
I wasn't as put off by the UI as much as other reviewers; initially I did think it was a little unnatural dragging stuff out of an inventory screen to make the inventory panel go away and then be able to use it on objects, but it was easy to get used to. I'll grant that maybe it's worth thinking about tweaking, especially if click-dragging stuff all over the screen if you have a trackpad instead of a mouse would end up being a significant pain in the butt. But I get the feeling that time would be better spent building an immersive story with clever puzzles than cutting down on the number of mouse clicks that players make.
For the issue of whether the cursor should indicate on mouseover which items are interactable to make it less of a "pixel hunt": I'm in the camp of saying you should be able to expect the players to look at the game's amazing graphics and find stuff instead of just having everything handed to them, as long as objects aren't ridiculously obscure. If you do decide to include a mouseover indicator, I would recommend making it be optional, and default to off.