The most confusing part is that it only happened really intensely on just one developer's machine.

I'll admit that the way we were using the image tag was a little unusual, but still something that was imminently supported by a plain HTML image tag.

My point is more that Next is such a bizarre black box that things like this were a regular occurrence.

To clarify: yes, it was the next Image tag. The moment we switched to using a plain image tag it resolved itself.