Not quite, I just suspect you're clearing it to an 'opaque' alpha value when you really want it to be cleared to a transparent one. You can try flipping the alpha to 1.0f/255u and seeing if that changes anything. Of course, all this is irrelevant if you're using an XRGB render target!

Is the *HUD* render target being cleared and/or XRGB, or is the backbuffer?

Yes, the hud render target gets cleared in the 'normal' way, i.e. clear
colour, clear z, with a colour of 0,0,0,0. Not sure what you mean by 'or
is the backbuffer?'

If you call Device->clear(X,...); the currently set rendertarget gets cleared, where the first parameter ist the stage you bound it to using SetRenderTarget(X, surface). So if you just call "clear" at the end of the render loop after you set the rendertarget back to backbuffer (SetRenderTarget(0,NULL)) only the backbuffer will get cleared. You need to call Clear expicitely when the texture is bound as a rendertarget. You need to clear the backbuffer like you probably do know in addition to that.

Plus, no need to "Clear z" for a backbuffer-sized rendertarget.