The other issue is, once I try to animate the box, and the rounded corners stop masking - if I delete everything from the stage and start over and just create a box with rounded corners, set the Overflow to Hidden, and embed something in it again, the rounded corners still won't mask the contents - even though I hadn't animated the parent box again. I basically need to start over with a new project.
I've included two sample Edge Animate files illustrating the issue.
It looks like this is a WebKit issue - I ran your test2 file on Firefox and it clipped just fine. I'll need to test on IE as well, but I suspect it's actually a problem with Chrome and Safari. I'll look into it a little further and file a bug with the browser.
Thank you! I tried it out in Firefox and it is working fine for me in that browser as well.