I finally had a chance to look at this issue again. It appears to be related to CPWizards interaction with MaLa. Here's what I tested last night:
Set CPWizard per this screenshot:

From MaLa launch a game and hit the "L" key to show the CP layout. The MAME window hides, briefly showing the MaLa layout window, and then CPWizrd shows its screen. Hitting the Ctrl key hides CPWizard and returns to MAME in a paused state. Great.
But when I exit the MAME game, it returns to MaLa with a blank layout - in other words the background is in front of the menus. I can hear the video playing from my MaLa menu, but can't see it until I change lists in the MaLa tree (Escape to the previous list).
So this is a MaLa issue, right? If I use the "Reorder Layouts" checkbox, it causes other problems.
Edit:
OK, strange things afoot. Here is what I am experiencing:
CPWizard set as above, but with Detect Pause checked.
MaLa
NOT set to reorder layout. I launch game from MaLa, then pause MAME. MAME hides, CPWizard shows after a very brief pause. I click Ctrl to hide CPWizard, and MAME resumes (still paused). I can exit MAME and MaLa returns as described above.
Now I set MaLa to reorder layout. I launch a game, then pause MAME. MAME hieds, but this time CPWizard takes about 12-14 sec to show. When I click Ctrl, I can then exit MAME and MaLa reorganizes itself nicely. Rinse and repeat.
Now is where things get weird. I set MaLa
NOT to reorder layout again. This time after MAME hides CPWizard takes 12-14 seconds to show again, but when I exit MAME I can no longer return to MaLa - although I can hear it running. I need to right-click on the window in the Taskbar and close it.
No changes were made to CPWizard between any of these attempts. So where can I begin trouble-shooting? I will try to take some video tonight to show what is going on.