A somewhat hacky approach, if you still need it: http://jsfiddle.net/36S7p/4/
I added a border and some margins around the mouse whenever the frame is being resized, this way it protects the mouse from the iFrame, if that makes sense.
Basically, add this to jQuery:
helper: "ui-resizable-helper"
and add this bit of CSS:
.ui-resizable-helper{
border: 75px solid rgba(239, 239, 239, .9);
margin: -75px;
}