Thanks for the added detail and for the log.
On first pass, regretfully, everything is looking correct in the logs, and similarly, have reproduced the scenario exactly with the primary 100%, secondary 125% and not seeing anything like this.
2026-03-14 00:14:46,864 - DPI Changed Applications, 96 -> 120
2026-03-14 00:14:46,864 - Minimum size changed Applications, 91x93 -> 114x117
2026-03-14 00:14:46,883 - ReadDesktopSpacing 100/100/100 iconSize(48) desktopSpacingRaw(75,98) desktopSpacingAdj(75,98) sysMetricsRaw(75,75) sysMetricsAdj(75,75) lvSpacingRaw(91,91) lvSpacingAdj(91,91) shim(0)
vs test machine:
[20176] DPI Changed DPITest, 96 -> 120
[20176] Minimum size changed DPITest, 75x101 -> 94x127
[20176] ReadDesktopSpacing 100/100/100 iconSize(48) desktopSpacingRaw(75,99) desktopSpacingAdj(75,99) sysMetricsRaw(75,75) sysMetricsAdj(75,75) lvSpacingRaw(91,91) lvSpacingAdj(75,99) shim(0)
So, nearly identical.
Indeed, I can generate this smashed-together look if I half pull a group from the one monitor to the other, but once it's over half way, it changes its spacing, and it appears to be showing this in the log as well.
Is there no change in spacing, as you move them between the monitors?
I wouldn't think this would have anything to do with anything, but it's also worth noting that a few files are showing up as not installed correctly

You're on a 64 bit system, so it shouldn't matter that DesktopDock.dll (32bit) is old, but FencesVersion.txt is missing also. Again the key file are up to date here, so it shouldn't matter. But this is odd. The "SAS-SPAK" file being so old, likewise, is concerning.
These files SHOULD look like this, which I'm pasting in from other user logs we've received:




So yes as much as it doesn't seem involved, this gives me pause. I don't think a reinstall is going to matter, but, and uninstall and reinstall might be warranted. I've looked through a dozen+ logs just now and haven't seen anything like this in them.
If you're able to do a screen recording of any kind, via phone, or etc etc, again it won't exactly help per se, but, this is confusing so just trying to get clues.