I am having the same issue. It seems the sidebar has issues in both Settings and Nautilus.
Settings has very odd gray bars when selecting something in the sidebar.

And Nautilus has the same problem plus alignment problems:

Kernel 6.8.0-45-generic
Resolution: 3440x1440
DE: GNOME 46.0
WM: Mutter
WM Theme: Adwaita
Theme: Yaru [GTK2/3]
Icons: Yaru [GTK2/3]
CPU: Intel i7-9750H
GPU: Intel CoffeeLake-H GT2 [UHD Graphics 630]
GPU: NVIDIA GeForce GTX 1650 Mobile / Max-Q
I have tried NVIDIA graphics drivers 535, 550, 560 (using graphics ppa) without success. I have also tried both Wayland and X11. With Wayland, the odd gray bars for selecting are gone, but the sidebar is still misaligned.