Originally posted by Meta: small game is also able to detect Freddy's snares and fake pallets atleast last time I tested it (around 3 months ago sadly)
It's not meant to work on Dream Snares and works on Dream Pallets only when inside Dream World.
This is definitely an issue with Steam Overlay, you can try out the Steam Beta Client (that got an update that fixed the issue), if you require the overlay on. Failing that turning off the overlay and then restarting Steam should fix it until a permanent fix is implemented.
The issue with pipping has been reported on the Official Forum (as there's no bug report section here on Steam so anything in relation to bugs is redirected there), there's no confirmed date for the fix to be implemented.