Here is a screenshot of the cameras mode set to "day" and the IR light set to "off"
http://screencast.com/t/iQhVcmcrBN
here is the same scenario, but with the garage lights on: http://screencast.com/t/ZkgNaIQTBx
You can see around the edge especially on the right side, a lot of color distortion.
It must be an issue with the IR light control because the halo only appears when it is on.