Blocks

According the teacher documentation, the closed-eye icon means an item is hidden from students.  The documentation does not say how the icon affects teachers.

Here is the behavior I get on my 1.6+ site.

• When I login to a course as teacher, hidden blocks are invisible
  
• The blocks become visible when I turn editing on, but their contents are hidden (expand(+) reveals only white space -- see attached screenshot)
  
• To see the contents, I must unhide the block (open the eye).  Before logging out, I must remember to close the eye in order to keep the block invisible to students
• When I login as student, hidden blocks are invisible, regardless of the course setting "Hidden sections."
  

Well, at least the student behavior seems reasonable .  Here's the behavior I had expected:

• When I login as teacher, hidden blocks are visible and their contents are also visible, even when not in editing mode.  I can freely collapse (-) and expand (+) the contents.
• When I login as student, hidden blocks are invisible (or possibly grayed out if the course setting "Hidden sections" is set to "Hidden sections are shown in collapsed form")

Is this a bug, or is it supposed to work this way?  If so, what is the rationale?  Is some site setting controlling this behavior?