The outline should only appear around the far edge of the viewport area, not within the emulated screen. It gets in the way when placed around the emulated screen.
Adding onto this, some of the emulated devices have started having these weird white edges around the same time the blue outline bug started happening.
Hi all! This was an unfortunate side effect of the viewport outline. I believe a fix for it should be out now, please ping me if it doesn’t work for you!