Yes, we do not have any controls that share rules. We ended up removing the panel around the control and put a rule on label and input fields (separate rules). That resolved the issue. More rules to track now, but the fields are hiding and showing without overlapping other fields, and when they are hidden, the space collapses like it should.
Great to hear it is resolved, I know these types of issues can drive you up a wall. They really do surround the placement of controls and the rules ordering and how they are placed (seems like having the rule applied to the panel was the cause in this case - causing the sharing of the rule essentially). Anyways, glad you got it straightened out.