Here's what I had to do.
I already had 'Tablet PC Input Service' disabled'.
But Visual Studio 2010 seems to enable something that causes bubbles to appear. I actually had two problems:
1) right click not working. you have to select 'use pen button as a right click equivalent' under the 'Pens' control panel (I dont have the exact name because it just seems to have disappeared!).
2) to disable the bubbles completely you need to do more than just disable the service.
Type "gpedit.msc" in the command line window and press enter.
Now, at the new window that opens, navigate to User Configuration > Administrative Templates > Windows Components > Tablet PC > Cursor.
Now enable the Turn off pen feedback setting. Yes - you have to enable it to disable it. Then they'll disappear.
This may be of use to anyone using Visual Studio 2010 which seems to want to reenable the bubbles for some reason!