Benjamin: That is for effect, i.e.harming potions do more when hitting the same block as the player's head. The falloff damage display can be found here: http://media-mcw.cursecdn.com/e/e2/2011-10-14_01.01.39.png
Also, I'll test the main bug out in a bit on 1.3.2 as well as 1.4.2.
Also, tamed wolves' collars are visible, again, a different texture.
Not a real bug. Straight from the wiki: "Note, that the base duration of splash potion is always ¾ the duration of corresponding drinkable potion."
I suggest changing the bug to splash potions incorrectly display duration or effect.
Follow up, couldn't reproduce on either. Can you let us know the version of minecraft, if it's ssp or smp, and what system you're running on? Thanks!