Sometimes enemies are fully red when placing your mouse over them, which seems to correct itself after a bit. You can uncheck & check the “Targeting Outline” option to fix it, but it returns.
I just noticed after the Ritual in ODV that now Malkadarr and the other guy are green when hovering over them:
The rest of the ODV are fine! 
I too have seen this.
I mean, experienced this while playing the game. 
It appears to happen for me when monsters are being summoned like when triggering a Totem or a Voidmarked chest similar to when I had the green outline for friendly NPCs during the Malkadarr binding ritual.
I have not seen this happen with regular enemies that are populated in the world.
I notice this happen when name of item laid on floor overlaps with enemy model, but not all and not every. Mostly happen on Aether earth (Valbury)
I’ve noticed it in the Broken Hills when the birds fly down from the sky. So guessing they are being summoned as well.
I’ve tried replicating this a few times, with the birds, and cannot get it to replicate. 
Can you post your Video Options please?
Seeing both of your options I realized I haven’t been playing with “Fog” turned on in probably forever (10+ years maybe? ), so I turned it back on and it’s like GD is a different game…
They’re just green with envy of your peak Fashion Dawn! 
I just saw this happen with monsters that were spawned from the Homestead portal (when you first arrive there during the main quest). Haven’t seen it before or after that.
edit: saw another monster with this bug, this time in the Temple of Osyr.
another edit: and another one from the shrine there (sorry for the bad crop).
I’ve had it happen to, seems like a ~2% chance to happen on any object that can have the usual outline, I’ve seen it red with enemies, green with NPCs and even white/yellow with some items on the ground.
Also have the same bug, for me it seems that the terrain somehow effects to this as sometimes when the monster moves the red outline changes from buggy to normal but if the monster stays on the same spot and bugs, it will bug until i kill it
Seems like your position relative to the outlined object is somehow affecting whether the outline is bugged or not.
Here I’m standing (or rather, floating) south of the destroyed ward
Southwest
West, the bug is gone
North
East
Southeast, the bug appears again
This makes total sense and why monsters when running around when I’m fighting them will turn red, then normal, then back to red depending on where they are in relation to me on the screen.
Great pickup there! 
