Actually, that little piece of fence is the problem here. The game acts all weird when you use fences or half walls on indoor rooms. If you replace the fence with a full wall and then add one of the big open windows from the basegame mission style set, the frieze problem should be solved. And the room will still look mostly similar to what it was. The open windows from cats and dogs are also a good alternative, but less fitting for the style of this build.
This issue is one of the main reasons I rarely use friezes. I had to get very creative when I rebuilt the Von Haunt Estate, as I did use friezes there and lots of fences for the museum look.