This has been happening for years, so it isn't just SW2010. If you are just seeing it now, and haven't ever seen it before, perhaps it is worse in 2010.
Thanks for the response. I imagine I've seen it in the past, but this case didn't ring a bell. I had broken out sections, and the sketches wouldn't allow me to manipulate the spline geometry because it was unsolvable, so I had to reconstruct the splines for the broken out sections just to tweak them a little. End of the world? No. Annoying productivity detour? Yes. But the point of my response is confirmation of your point, maybe it's worse in 2010. Anecdotally it seems to be in this case.
Jay, check around your origin. You may have some "artifacts" around it, particularly if you've imported the sketch from autocad. If not, oyu may try (saving first then) deleting parts of your sketch to see what may be the problem.
The "Items Conflict" error turns the offending sketch geometry yellow, so it's hard to see on a white or light colored background. You can try changing the background color if that is the case for you.
Hope this helps!