How many tracks do you have? Do you have multiple tracks of virtually the same event or “clip” stacked directly over one another? It appears that the smaller picture you see is coming from an “upper” track that is “in front” of the video behind it (and below on another track). The reason you are seeing it around the edge seems to be because you have set the “Track Motion” for the upper track to “3D Source Alpha” instead of the default “Source Alpha”. Putting that track into 3D Source Alpha mode allows you to resize and move that event around on the viewing screen. One thing you may want to try is to select the left-most keyframe for this track (located towards the bottom of the Track Motion dialog box), then at nearly the top, select the Preset dropdown list and select Default. See picture describing all this below.

Andrew Lenczycki