Not a bug
BYOND Version:493
Operating System:Windows 7 Home Premium 64-bit
Web Browser:Firefox 8.0
Applies to:Dream Seeker
Status: Not a bug

This is not a bug. It may be an incorrect use of syntax or a limitation in the software. For further discussion on the matter, please consult the BYOND forums.
Descriptive Problem Summary:
"Big Icons" cause layering issues in isometric mode.

In this example, the character's sprite is 240x240. The walls have a layer of MOB_LAYER + 1, and have a size of 160x240. world.icon_size is set to "160x80". The floor tile is 160x80.
There are known limitations to using big icons with isometric mode. This is documented.
So this is never going to be resolved?
At present there's nothing to resolve; the use of big icons is known to be limited in isometric mode, which is why this topic is discussed in the reference. Big icons in isometric are pretty much just intended for dense turfs, because the layering issues are otherwise too difficult to resolve.

In the future I'd like to redo isometric layering to include a topological sort, which can be a lot smarter about how it layers items. The trick is that cycles in the sort order are actually surprisingly common, and resolving them is not a trivial task.
I'd be happy with an ETA on when isometric layer might be rehauled. My project will likely take a long time before its ready for release and I feel like the layering issue is a minor cosmetic issue that I can live with for now. If it's more of a, "maybe someday" feature, then I'll have to redesign my project to use a bigger world.icon_size.
Any overhaul of isometric layering is going to focus on the case of smaller objects with step offsets, not bigger objects.