It's really strange that no one else can reproduce it. :\ Like I said I've done it on 3 machines which all have totally different hardware configurations.

I've tried mIRC with menubar/switchbar/treebar/toolbars disabled and placed in all sorts of positions. My first thought was that somehow it was tied to the new treebar.

I've been experimenting with it some more though, and I now think it is related to tooltips in some way.

Here another, perhaps better/more reliable, way to reproduce it:
1) Open mIRC, a server status window, and a channel window (more channels will work, but 1 will do)
2) Mouse over the Status window on the switchbar until the tooltip pops up (ie. "Status: Nickname [+mode] on Server (host:6667)")
3) Without moving the mouse cursor off the switchbar (very important) mouse over the channel window (channel windows have no tooltip) and the desktop icons should immediately be blinking fairly rapidly (several times per second) for as long as you leave your mouse there or anywhere on the switchbar other than the status window.

With any luck someone can reproduce it this way. I may look into seeing what version it first appears in if not, all I can say for now is it's not in v6.21.