I recently updated the app to use a new framework, WinUI3, which is the "predecessor" of UWP and quite a few things changed there. I am now using this API to set a window as an "overlay window", but as it seems, the task bar wants to be top-most as well, creating this conflict.
I tried a few hacks to overcome this, but wasn't successful. I also think the behavior makes sense that the taskbar should be shown topmost.
However, with the new update the overlay window can now be resized to a smaller size, so maybe that helps