Ok, so the entries causing the problem are
<FRAME>
...
<Entry Name="LeftBorder" Bitmap="Frame_LeftBorder.png" Margins="0,60,0,22" TransColor="FF00FF" DrawMode="REGION_E_VTILE" Scale="2" />
<Entry Name="RightBorder" Bitmap="Frame_RightBorder.png" Margins="0,60,0,22" TransColor="FF00FF" DrawMode="REGION_E_VTILE" Scale="2" />
...
</FRAME>
More specifically, it's the scaling... remove the Scale="2" and the flashing stops, but the size of the graphics are wrong. With the old skin, everything is right on my display, but I'm guessing may not scale as well on other devices.
In the current build, the only skin that don't flash for me is: Noire but that seems to be a completely different template to the other skins so it's not as easy to compare differences.
So, it seems that the root issue is the scaling changes made aren't 100% working in every case.
I already use a custom Thunderstorm skin to correct some other problems caused by the DPI/scaling changes, so I guess I'll just edit my local copy to fix the flashing DSP for my own use.