Updated implementation to better pass tests, still not 100% though.

src/mousetracker.js

@@ -193,7 +193,7 @@
             mousemove:             function ( event ) { onMouseMove( _this, event ); },
             mousemovecaptured:     function ( event ) { onMouseMoveCaptured( _this, event ); },
 
-            mouseoutdocument:      function ( event ) { onMouseUp( _this, event ); },
+            mouseoutdocument:      function ( event ) { onMouseOutDocument( _this, event ); },
 
             touchenter:            function ( event ) { onTouchEnter( _this, event ); },
             touchleave:            function ( event ) { onTouchLeave( _this, event ); },
@@ -1053,7 +1053,7 @@
             }
 
             // handle mouse out of document area
-            $.addEvent(document, "mouseout",  delegate.mouseoutdocument);
+            $.addEvent(document.body, "mouseout",  delegate.mouseoutdocument);
 
             delegate.tracking = true;
         }
@@ -1081,7 +1081,7 @@
             }
 
             // handle mouse out of document area
-            $.removeEvent(document, "mouseout",  delegate.mouseoutdocument);
+            $.removeEvent(document.body, "mouseout",  delegate.mouseoutdocument);
 
             delegate.tracking = false;
         }
@@ -1537,6 +1537,17 @@
         }
     }
 
+    function onMouseOutDocument( tracker, event ) {
+        event = $.getEvent( event );
+
+        var html = document.getElementsByTagName("html")[0];
+        if ((event.relatedTarget!==html && event.relatedTarget!==null) || event.currentTarget !== document.body) {
+            return; // not a mouseout of the iframe
+        }
+        event.buttons = undefined;
+        event.button = 0;
+        handleMouseUp(tracker,event);
+    }
 
     /**
      * @private

test/events.js

@@ -165,6 +165,13 @@
         var simulateLeave = function (x, y) {
             simEvent.clientX = offset.left + x;
             simEvent.clientY = offset.top  + y;
+            simEvent.relatedTarget = document.body;
+            $canvas.simulate( OpenSeadragon.MouseTracker.haveMouseEnter ? 'mouseleave' : 'mouseout', simEvent );
+        };
+        var simulateLeaveFrame = function (x, y) {
+            simEvent.clientX = offset.left + x;
+            simEvent.clientY = offset.top  + y;
+            simEvent.relatedTarget = document.getElementsByTagName("html")[0];
             $canvas.simulate( OpenSeadragon.MouseTracker.haveMouseEnter ? 'mouseleave' : 'mouseout', simEvent );
         };
 
@@ -446,6 +453,33 @@
                 quickClick:            false
             });
 
+
+            // enter-press-move-exit-move-release (drag, release outside tracked element)
+            resetForAssessment();
+            simulateEnter(0, 0);
+            simulateDown(0, 0);
+            simulateMove(1, 1, 5);
+            simulateMove(105, 105, 5);
+            simulateLeaveFrame(105, 105);
+            simulateMove(105, 105, 5);
+            // you don't actually receive the mouseup if you mouseup outside of the document
+            assessGestureExpectations({
+                description:           'enter-press-move-exit-move-release-outside (drag, release outside iframe):  ',
+                enterCount:            1,
+                exitCount:             1,
+                pressCount:            1,
+                releaseCount:          1,
+                moveCount:             15,
+                clickCount:            0,
+                dblClickCount:         0,
+                dragCount:             10,
+                dragEndCount:          1,
+                insideElementPressed:  true,
+                insideElementReleased: false,
+                contacts:              0,
+                trackedPointers:       0,
+                quickClick:            false
+            });
             unhookViewerHandlers();
 
             viewer.close();