Actually it's not too bad.

Good job.

Hey yeah it's not too bad

My suggestions would be:

1. Change the background colour based on your deviation from the line, or at least when you are getting far from the line (I felt like the game end rather abruptly)

2. Maybe have a health bar that you lose health from each time you go off the bar

3. Some kind of bonus points system, like having 2 paths fork off the trace, one of which is harder to follow and gives you more points, the other which is easier so you're less likely to die. And/or you could have bonus icons that appear on the line temporarily, that you have to move quickly to get.

That's a good and quite original game. I regret there is no highscore, so it is difficult to consider one's progress into the game. Also, you should allow the player to start the game by pressing some mouse button. Forcing the player to use the keyboard to do so, whereas the game is only played with the mouse, seems odd.

Loading your applet, I still have a ClassNotFoundException on your Trace4K.class. Patience.

I think I've fixed the problems, caught a few bugs myself.
I made it so that dragging the mouse doesn't stop the reticle (it used to be because I was only updating the reticle in MOUSE_MOVE and not MOUSE_DRAGGED). The clicking problem is fixed (pretty sure). The crashing with high scores is fixed too, I think:

30000 score with 5x lines and points added. Should be fine.