Here is an updated Picture1_MouseMove that should be a bit more accurate:
Code:
Private Sub Picture1_MouseMove(Button As Integer, Shift As Integer, X As Single, Y As Single)
    Form1.Cls
    If (X + Picture1.Left > Command1.Left And Y + Picture1.Top > Command1.Top) And _
       (X + Picture1.Left < Command1.Left + Command1.Width) And _
       (Y + Picture1.Top < Command1.Top + Command1.Height) Then
        Print "Mouse moved over button (through PictureBox)"
        Else
        Print "Mouse Moved over Picturebox"
    End If
End Sub
Nifty Idea on how to handle this problem though.