Base layer object appears on layer even if deselected in timeline

I would remove the Hover state from all Ovals and make the Normal state look exactly like the current Hover state. Then, I would adjust the triggers to toggle the Oval’s Disabled state when the user hovers over the Show Layer hotspot.

This problematic behavior can be reproduced consistently, not only in your project, but in any other project, with or without hotspots. The actual problem is that the Hover state of the object on the base layer remains active while the other layer is being displayed. In your case, when you open the layer, the Feedback Master applied to that layer has no fill, and the Content Body shape is semi-transparent. Your mouse is still positioned over the Show Layer hotspot on the base layer, which has a trigger configured to restore the previous state. At that point, the Oval may be hidden in the layer timeline, but its Hover state is still active. As soon as you move the mouse away from the hotspot, the hover-out event is triggered and the Oval's state changes back/restores. Because of the way the layers and z-index are stacked, the Oval then becomes visible again and reappears in the layer.

Another workaround would be to make the Content Body 100% opaque. This would prevent the Oval from being visible through it, even if the Oval becomes visible again.

So the key issue is that the Hover state is still active and is waiting for the hover-out event to change the Oval's state. To prove the point, uncheck “Restore previous state when the user hovers out", and the issue will also disappear. Removing the Hover state and using a toggle for Disabled eliminates the dependency on hover-in/hover-out behavior.

Anyway, I’ve attached my version for your review. I tried not to alter your original idea, aside from reverting the oval object states and adjusting the existing “when the user hovers over”  triggers.