Why does the same material render differently here?

I have two examples.

The first demonstrates a prefab with two materials (a checker pattern and a green outline) added to it's mesh renderer. The result is as expected.

The second prefab includes only one material and has the other material added at runtime. This however, led to some unexpected artifacts surrounding the newly added material.

Here is the source:

 public class Init:MonoBehaviour
 {
     private Object fine;
     private Object crap;
     private GameObject[,] blocks;
     private Material highlight;
 
     void Start () {
         highlight = (Material)Instantiate(Resources.Load("Materials/Highlight"));
         fine = Resources.Load("Prefabs/Fine");
         crap = Resources.Load("Prefabs/Crap");
         blocks = new GameObject[10,10];
         
         for(int i = 0; i <= blocks.GetUpperBound(0); i++)
         {
             for(int j = 0; j <= blocks.GetUpperBound(1); j++)
             {
                 /*
                 // This looks fine.
                 blocks[i, j] = (GameObject)Instantiate(fine);
                 blocks[i, j].transform.position = new Vector3(i, -0.5f, j);
                 /*/
                 // This looks like crap.
                 blocks[i, j] = (GameObject)Instantiate(crap);
                 blocks[i, j].transform.position = new Vector3(i, -0.5f, j);
                 
                 Material[] m = new Material[2];
                 m[0] = blocks[i,j].renderer.materials[0];
                 m[1] = highlight;
                 blocks[i, j].renderer.materials = m;
                 //*/
             }
         }
     }
 }

Finally, the entire project can be downloaded here.

Thanks for reading.