Invisible entities and mobs upon death

Whilst playing Normal SSP, I noticed that nearby mobs and dropped player items turn invisible upon death. No shadows present. Items can be picked up as normal. Mobs make noises and attack as normal.

I thought this was an issue with dying near a spawn area, but it may be more related to the death site itself.

Initially, logging out of the game and logging back in can restore visibility, at the risk of the said mobs swarming you as you log in.
Continuing to play after death revealed the invisibility issue occurred closer to the site of death. Multiple deaths restored the visibility of some mobs while other mobs closer to the death site became invisible.

Possibly related; whilst playing on the same session and world, I dove down to a shipwreck. While opening a chest, it looked empty. I closed it and opened it again. The entities inside appeared as normal.

I have attached a .zip file of the world in question. One will likely spawn down in the shipwreck, but the initial spawn area is the nearest island.