FULL PRODUCT VERSION :
C:\Documents and Settings\kyle.smith>java -version
java version "1.6.0_16"
Java(TM) SE Runtime Environment (build 1.6.0_16-b01)
Java HotSpot(TM) Client VM (build 14.2-b01, mixed mode, sharing)

ADDITIONAL OS VERSION INFORMATION :
Microsoft Windows XP SP3

A DESCRIPTION OF THE PROBLEM :
Heavyweight components paint on top of light weight components if the heavy weight components are in JInternalPanes inside a JDesktopPane that has GridBagLayout or is inside a JScrollPane.

STEPS TO FOLLOW TO REPRODUCE THE PROBLEM :
Create a JDesktopPane with several JInternalFrames inside it.
Add a heavy weight button to each internal frame.

Incorrect painting happens when:
1. The layout on the JDesktopPane is set to GridBagLayout (didn't try other layouts) - the button paints on top of adjacent components when dragging the internal frame

2. The JDesktopPane is in a JScrollPane - the button paints on top of adjacent components when scrolling but not when dragging the internal frame.

EXPECTED VERSUS ACTUAL BEHAVIOR :
EXPECTED -
Expect heavy weight buttons to clip appropriately when moving and scrolling.
Internal frames behave appropriately.
ACTUAL -
Buttons show on top of components outside the JDesktopPane and on top of other internal panes when they should not.

REPRODUCIBILITY :
This bug can be reproduced always.

---------- BEGIN SOURCE ----------
    private void createAndShowGUI() {
        //Create and set up the window.
        frame = new JFrame("HelloWorldSwing");
        frame.setDefaultCloseOperation(JFrame.EXIT_ON_CLOSE);
        frame.setPreferredSize(new Dimension(200, 200));

        JPanel panel = new JPanel();
        panel.setLayout(new GridBagLayout());
        frame.getContentPane().add(panel);
        
        JButton testButton = new JButton("This is a test");
        testButton.setBackground(Color.CYAN);
        testButton.setOpaque(true);
        GridBagConstraints gbc = new GridBagConstraints();
        gbc.gridx = 0;
        gbc.gridy = 0;
        gbc.fill = GridBagConstraints.HORIZONTAL;
        gbc.gridwidth = GridBagConstraints.REMAINDER;
        panel.add(testButton, gbc);
        
        JPanel lwPanel = new JPanel(new GridBagLayout());
        Dimension dimension = new Dimension(500, 500);
        lwPanel.setPreferredSize(dimension);
        lwPanel.setMinimumSize(dimension);
        
        JScrollPane scroller = new JScrollPane(lwPanel);
        scroller.setVerticalScrollBarPolicy(JScrollPane.VERTICAL_SCROLLBAR_ALWAYS);
        gbc = new GridBagConstraints();
        gbc.gridx = 0;
        gbc.gridy = 1;
        gbc.weightx = 1;
        gbc.weighty = 1;
        gbc.fill = GridBagConstraints.BOTH;
        gbc.gridwidth = GridBagConstraints.REMAINDER;
        panel.add(scroller, gbc);
      
        
        JDesktopPane desktop = new JDesktopPane();
// desktop.setLayout(new GridBagLayout());
        gbc = new GridBagConstraints();
        gbc.weightx = 1;
        gbc.weighty = 1;
        gbc.fill = GridBagConstraints.BOTH;
        lwPanel.add(desktop, gbc);

        String[] titles = {"one", "two", "three", "four", "five"};
        for (int i=0; i<5; i++)
        {
JInternalFrame iFrame = new JInternalFrame(titles[i], true, true, true, true);
iFrame.setLayout(new GridBagLayout());
iFrame.setPreferredSize(new Dimension(150, 55));
iFrame.setLocation(20, i*60);
gbc = new GridBagConstraints();
gbc.gridx = 0;
gbc.gridy = i;
desktop.add(iFrame);

Button button = new Button("HW Button");
gbc = new GridBagConstraints();
gbc.gridx = 0;
gbc.gridy = 1;
iFrame.add(button, gbc);

iFrame.pack();
iFrame.setVisible(true);
        }
        
        testButton = new JButton("This is a test");
        testButton.setBackground(Color.CYAN);
        testButton.setOpaque(true);
        gbc = new GridBagConstraints();
        gbc.gridx = 0;
        gbc.gridy = 2;
        gbc.fill = GridBagConstraints.HORIZONTAL;
        gbc.gridwidth = GridBagConstraints.REMAINDER;
        panel.add(testButton, gbc);

        frame.pack();
        frame.setVisible(true);
    }

---------- END SOURCE ----------

CUSTOMER SUBMITTED WORKAROUND :
Partial workaround is to put the scroll pane in a heavy weight panel.