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Pure Grid works wonders for me. Looks great, too.
Another vote for Calendar Pad. About the only thing I don't like about it is that it doesn't let you pick which calendars to display if you have more than one through your GMail account. I still keep the default calendar also on my desktop to do the switching.
I have the same setting as you but do not have the same problem - behaves properly here.
I am having the same trouble using the stock calendar on my Incredible! Only when editing "all day" events though.Thanks - must be something specific to HTC Sense, 2.1 or the Desire.