
I got the exact same problem.
No parent are set to static and no padding on the background sprite.
I got 4 of these popup list in my panel, each are on a separate z-depth.
I try with text item (no smiley), different negative Z value but that did not fix it.
Anyway, I don't think I need to mess with position Z since the Highlight sprite should simply focus on the selected item when the popup list is opening.
I got this with Popup Menu too.
When I randomly edit one of the 4 popup list, sometimes another got his highlight correctly fixed.

The parameters are pretty much the default one, except
position is set to
below and
padding to
x=5 y=4.
I also try the default one of course...