Basically, when people started crashing out because they encountered Cata client files that they didn't have, Blizzard's first attempt at a fix was to install those placeholder cubes for those that weren't Cata-enabled, in the hopes that it would fix the problem. It didn't, because they didn't replace all the content, just the ones that they thought people were most likely to encounter (the Mario Sunshine backpack (yes I went there), the incense burner, etc). At some point they started telling people to download the Cata client-side content, and it seems that whether or not your placeholder cubes got replaced was just random... for example I used to see the backpack as cubes and now I see the backpack, but the incense burner is still a cube to me. It's all very strange. I suspect that if a person installed the game from the online download, and then immediately did the "BC -> CT" trick to download the rest of the data before ever logging in, that they would be cube-free. I can't be sure about that though.
I know all this because I was plagued for a LONG time with perpetual instant disconnects in Stormwind due to someone being in the area who had some Cata armor or mount or something on them, and my client would just quit to the login screen... sometimes 50-60 times in a row. (until I'd give up or they'd leave the area) so I got lots of chance to get familiar with the problem.
P.S. I'm up at 6am and typing in a very rambling manner.