Well the images speak louder than anything I can say. Not sure what is causing this, but when transitioning between 2 UI elements I get this weird issue. Both images have materials that contain a render texture as the materials basemap. So the character and the plushie are 3D models rendered down to textures and place into a material and onto an image. The only way to clear this is close the editor or application. But the teddy creates a cut into the other image for some reason. I’ve had the character do it to themselves a couple times before too.
So I tried a couple things, the above view was using alpha clipping on the material to get the transparent background in a lit urp material. Maybe that played a part in it. But I also disabled that and changed the material to an unlit material with a surface type to transparent with an alpha blending mode and got a transparent background only to have the same issue with it cutting out the whole image from the other image.
In short, not really sure what is happening here with rendering to materials so I bypassed this all together and achieved what I was going for by simply using Raw Image components instead of normal images and materials.