I posted an issue like this to the Immersive Engineering github and turns out this issue is to do with immersive railroading.

Essentially the enchanted overlay is literally just a giant square which looks really wrong.

BluSunrize/ImmersiveEngineering#3492 Immersive Engineering github post I made.

This should be fixed with changes made in modcore. If IR version 1.7.0 does not fix this issue (when released in a few weeks) please re-open the issue.