Not sure if this is a hardware or software issue.
Through the Picasso IV display I was getting really garbage icons, the more time that went by (with the computer on, the worse they would get). I would also notice the problems on some games (promoted through the picasso IV screen).
I removed a background image from the workbench so that the background is just the standard amiga grey, and the icon garbage issue went away.
Does that sound like maybe its a render setting issue?... or maybe a jumper on the picasso?
-Dan