Just installed the update released yesterday (7-14-09) and my problem is still there - the fences themselves hide just fine with double-click on the desktop but the icons within the fences don't & stay visible on the desktop.
XPP SP2 on a Dell Vostro 1500 notebook, Core2 Duo 1.4Ghz with 2GB RAM, NVIDIA GeForce 8600M GT with 185.85 drivers (most recent WHQL set).
There's not much unusual about my rig but here's the system info from WBConfig just in case:
WindowBlinds version : WindowBlinds 6.4 (build 73 x86)
WindowBlinds is installed correctly on this PC
WindowBlinds appears to be activated on this PC
Your machine supports per pixel borders on WindowBlinds skins.
(Plug and Play Monitor) 1 is attached to NVIDIA GeForce 8600M GT
Wblind.dll 2009/03/24 14:04:20
Wbsrv.dll 2009/02/10 15:28:58
Wbconfig.exe 2009/02/10 15:28:20
Wbload.exe 2008/04/28 11:35:14
Wbhelp.dll 2008/04/28 11:35:07
Wbui.dll 2008/04/28 11:35:05
Tray.dll 2008/04/28 11:35:21
Screen.exe 2008/06/13 11:24:09
It also happens that I have both a domain profile and a local-machine profile that I use to log on to this machine.