Those white circles aren't cursor artifacts — they're Windows' touch-feedback indicators, which only appear when the digitizer registers an actual touch. That's the key clue: this isn't your mouse or trackpad driver acting up, it's the touchscreen digitizer itself generating phantom touch events, concentrated along the top edge of the panel.
Hardware or software?
This pattern — worsening shortly after boot, clustered along one edge, confirmed by real touch-feedback circles — points strongly to hardware, not software. Two likely culprits for a 2020 Surface Book 2:
Digitizer/display flex cable degradation — a known failure mode on this generation, often worse after the device has warmed up (heat expansion on a marginal connection).
Battery swelling — very common on aging Surface Book 2 units. The battery sits directly behind the screen, and swelling can physically press against the digitizer layer, causing exactly this kind of ghost-touch behavior along an edge. If you can see any doming, gap, or separation at the seams of the screen (tablet portion), stop using it and don't charge it — a swollen lithium battery is a fire/puncture risk, not just an annoyance.
Quick way to confirm hardware vs. software: watch the UEFI/BIOS setup screen (power off, then power on holding Volume Up) before Windows loads. If phantom touches/clicks happen there too, it's 100% hardware — Windows isn't even running yet.
If it's the digitizer/cable: repairable, but it means replacing the screen assembly — an expensive, glue-heavy job on this model. Not something to DIY without experience; a Microsoft Store or authorized repair center would need to do it, and out-of-warranty cost is often close to a used replacement unit's value.
If it's a swollen battery: also a screen-assembly-level repair (battery is glued in), and it needs professional handling due to the fire risk — don't attempt this yourself.
A cheap first step: in Device Manager, under Human Interface Devices, disable the touchscreen entry. If phantom touches stop, that confirms the digitizer and gives you a usable workaround (external mouse/keyboard, no touch) while you decide on repair vs. replace.