Polygon inside transparent cylinder not visible

[zombich]

I have a transparent cylinder shape which I use as a kind of 3D cursor, it follows the terrain and it responds to mouse movement. It is a few thousand km tall and its centre point is at 0 altitude.

I also have textured polygons on the ground (not surface shapes, just plain 4-vertex textured polygons 100 m above the ground).

When the cylinder is in front of these polygons, I can see the polygons through the cylinder, however, when the cylinder is over the polygon (so that the polygon is effectively inside the cylinder), the polygon disappears. The terrain the cylinder envelops can still be seen, but the polygon which is supposed to be just above that piece of terrain is not visible.

You can see this on the images attached. Is this a bug, or am I missing something?