Try the TC020 version of icon.library found on aminet. This also makes any png icons you might have visible again.
It’s a fresh install on a stock (emulated) 4000 with plain, 4-color icons. The only explanations for the gadget corruption are a 3.2 system bug or an FS-UAE emulation bug.
Could be, but over here opening pointer prefs gives a corrupt display on uaertg 1920*1080*32. Replacing the stock icon.library with the one from aminet solves this problem.