We were able to reproduce the described behavior and found out what is causing it. So when the height of the watermark is bigger than the default one, the ScrollViewer inside it is not stretched and stays with the default height of the Watermark. Therefore when hovering its border the mouse state is changed.
We have logged the issue in our system and you can find it here.
Nevertheless there is an easy workaround that can be used in order to fix it. What you need is just to set VerticalAlignment="Stretch" to the mentioned ScrollViewer. You can observe the changes in the attached project.
Please, excuse us for the inconvenience. We have added points to your account for the report. Don't hesitate to contact us if you have other questions.
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