If I try to change the extension of a file on the desktop, Windows displays a warning dialog (as expected). However, with Fences installed, the dialog appears briefly (fraction of a second) and then gets placed behind/under any open windows (i.e., bottom of the z-order). Attempting to bring it to the foreground (by clicking on the title of the dialog) caused the dialog to again be moved to underneath.
This seems to happen other dialogs related to the desktop (for example, the Confirm File Replace dialog if you try to paste a file to the desktop when there's already a file with that name).
I just installed Fences 2.01 on Windows 7 64-bit (I am using ClassicShell, but I think that this behavior just started with the installation of Fences).