Rated as P4 for now. 1.3.10 release does not have this issue, 1.3.11 release does. 

Scanning the changes in that period with my inexpert eye the only candidate I see that might be related is http://code.google.com/p/audacity/source/detail?r=9954  .

(In reply to comment #1)
Narrowing it down a bit further - the problem seems to be due to line 1338 in TrackPanel.cpp

   // Update the indicator in case it was damaged if this project is playing
   AudacityProject* p = GetProject();
   if (!gAudioIO->IsPaused() &&
       ( mIndicatorShowing || gAudioIO->IsStreamActive(p->GetAudioIOToken())))
   {
      // We just want to repair, not update the old, so set the second param to true.
      // This is important because this onPaint could be for just some of the tracks.
      DoDrawIndicator( cdc, true);
   }


I don't know why !gAudioIO->IsPaused() is used here, but if it is removed then this problem does not occur.

   // Update the indicator in case it was damaged if this project is playing
   AudacityProject* p = GetProject();
   if ( mIndicatorShowing || gAudioIO->IsStreamActive(p->GetAudioIOToken()))
   {
      // We just want to repair, not update the old, so set the second param to true.
      // This is important because this onPaint could be for just some of the tracks.
      DoDrawIndicator( cdc, true);
   }

Still broken in 2017.

DEVEL - FIX MADE
https://github.com/audacity/audacity/commit/c15bbc59dbbcc73012e98f4973e63fee0e3d2211

(In reply to James Crook from comment #4)
Testing on macOS Sierra 10.12.6 db97fea 15Aug

Tested with
1) Ordinary Play and Pause
2) Timeline Quickplay and Pause
3) Scrubbing and Pause

a) zooming in
b) zooming out

In all 6 variant use cases the Timeline zoomed prioperly along with the waveform,

Also tested with Note Track Play and TQP with pause - all ok

Also the Timeline zooms correcty when zooming while actually playing.

Looks to be fixed ok

(In reply to James Crook from comment #4)
Tested on W10 audacity-win-e984211-2.2.0-alpha-21aug17

Similar tests on Windows shows this to be fixed there too.