Im in the latest snapshot [15w45a at the moment this was uploaded] and I have a contraption and in a repeating command block I do /setblock ~ ~2 ~ dirt and the piston head comes off plz try in 1.8.8 to confirm.
MC-92492
Piston rendering issues with /setblock above piston
Resolved
Invalid
0
You placed dirt over a piston extension. The piston extension disappeared. I don't see the issue.