Thank you for finding the source of the problem and figuring out a workaround. I will see if I can incorporate this workaround in my UI.
Looking a bit further into the mouseout event not getting called, it seem like it's not the iframe that is causing the problem. If the button is covered by any absolute positioned element, the event doesn't get called either. In my UI some of the buttons are partially covered by such an absolute positioned element as part of an expandable side-menu. So adding a margin there is not going to be straight forward but I think I can make it work somehow.