Blender mouselook problem Intro:

Hello there! I am making an FPS, and I have deleted way too many good projects of mine due to this problem; I am sick of it and I want it solved. My other question about it got closed because it was unclear, so I'll make this as clear as possible.

Scene:

I have a simple scene with a plane. The plane is default, with no edits to it, not even a texture. It has only been scaled, that's all. After that, above the ground a bit, is my character. The collision bounds (rectangle) is basically just a collision bound to a model (character) that is set to "no collision" and is not an actor. The character has nothing to do with this. It does not affect anything. The only important part is the head. The head is part of the character and has Mouse (Movement) > Python. The Python is just the mouselook script. The head is the parent of the camera and just has ml.inherit along with some cap options (in the logic editor). There is also some basic lighting.

Problem:

Every time I look upwards with my mouse (moving my mouse forwards), just 1 degree above where the head normally faces, the whole scene just gets "ruined." However, this does not happen when I look down. What happens when I look up is that it seems that the lighting, first of all, is quickly, every millisecond, "flipped" where the ambient is more brown instead of blueish yellow. At the same time, the head keeps on flashing (going between visible and invisible). I think the head flashes once per second, but I'm not sure. How do I stop the "twitching" from happening? Here is my .blend, thank you!
As of 2.72, there is a new mouse actuator which you can use to rotate objects based on mouse movement.



By using this actuator instead of the python script, it seems to work fine: