Another piece of oddness - with a picture ...

As you can sort of see - the icons are in the fence but not in the fence.
They scroll with the scrollbar but aren't clipped to edges of the fence.
They also do not vanish with the double-click although they are not marked excluded.
They do move when you move the fence.
Resizing the fence does not clear it.
Taking a snapshot and re-instating it doesn't clear it.
Auto-arranging the desktop doesn't clear it.
Came up like that from a cold boot - about to try a reboot to see what happens.