I have been working with Apple for three weeks now on this. I have submitted screen shots, events and various descriptions of what has been causing the issue. I am now in the process of uploading projects, events and screencasts to Apple's ftp site.
Apple has confirmed to me that this is a software bug, and an internal code that is not intended to be displayed. It appears it is caused and can be intermittently corrected by several various things.
Here is the latest data I am working on:
I have found a repeatable instance of this red band being created when certain clips are retimed using optical flow. I found this on three projects to date and under 10.0.3 and 10.0.4 and under Lion OS 10.7.2 and 10.7.3. If the retimed clips are trimmed in the timeline by extending or shortening them, the red band immediately appeared above the entire clip. If clicking outside the timeline and then back inside the timeline, the red band renders itself gone immediately. This doesn't always happen, but I got it to repeat 5 times in a row doing this.
Secondly, I have never used iMovie or imported any iMovie projects into FCPX, so I cannot comment on how that may cause the issue.
Thirdly, the initial project which prompted my post on this thread had a Motion Jpeg clip that was retimed with optical flow. This was the first time I noticed the red band. By detaching the audio from that clip, the red band immediately disappears. To bring it back, I simply selected the clip and the Audio and made it into a compound clip....like clockwork, the red band is back. Detach that audio and it's gone. This is how I originally got my initial project to work, having to go back and forth and detaching certain audio clips. Disabling the clip in the timeline will directly remove the associated red band also.
Finally, even though I seem to now be able to routinely reproduce the red band when retiming various clips, it does not appear to be causing any harmful issues with performance or playback, as it once did.
To date I have had several email correspondences with Apple on this and have supplied most of what they asked me for regarding this issue. I still need to get more data to them but I know they are committed to getting this resolved.