Came up with this simple Workaround a while ago… (but forgot to post it) 
To remove the line distortion at the top of Reflection thumbnails a simple edit is required.
For Example: the orginal reflection xml code…
<wrapper y=“380” w=“190” h=“285” scale=“100” mirror=“1”>
<image name=“th0"image=”@@browse_0_thumbnail" default_image=“@@default_thumbnail_0” x=“151” bg=“1”/>
<image name=“th1"image=”@@browse_1_thumbnail" default_image=“@@default_thumbnail_1” x=“349” bg=“1”/>
<image name=“th2"image=”@@browse_2_thumbnail" default_image=“@@default_thumbnail_2” x=“547” bg=“1”/>
<image name=“th3"image=”@@browse_3_thumbnail" default_image=“@@default_thumbnail_3” x=“745” bg=“1”/>
<image name=“th4"image=”@@browse_4_thumbnail" default_image=“@@default_thumbnail_4” x=“943” bg=“1”/>
<image name=“th0"image=”@@browse_0_thumbnail" default_image=“@@default_thumbnail_0” x=“151” bg=“1”/>
<image name=“th1"image=”@@browse_1_thumbnail" default_image=“@@default_thumbnail_1” x=“349” bg=“1”/>
<image name=“th2"image=”@@browse_2_thumbnail" default_image=“@@default_thumbnail_2” x=“547” bg=“1”/>
<image name=“th3"image=”@@browse_3_thumbnail" default_image=“@@default_thumbnail_3” x=“745” bg=“1”/>
<image name=“th4"image=”@@browse_4_thumbnail" default_image=“@@default_thumbnail_4” x=“943” bg=“1”/>
simply alter and add this to the code in RED …
<wrapper y=“380” w=“190” h=“282” scale=“100” scale_type=“pan” align=“bottom” mirror=“1”>
So, this crops the cover by 3 pixels and moves it ‘up’ (align=“bottom” does the reverse to a flipped image)
The Line Distortion is only visable (very briefly) during the Cover Caching process … but once finished the Line is not visable again.
No Overlaping or Overlays are needed to hide any “Line” (Because it’s not visable) … and you can increase the distance between the Poster and it’s Reflection.
A “Diffusion” Layer is still required for the “Fading” effect.
eg.
