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I know of no reason this would happen.
Have you checked your clip properties to ensure you have your matte applied to the right video track?
I believe that is the exoected behavior. I assume that the track matte effect is applied to Photo2 in track to, and you have selected vthe video 3 track as the matte.
That is the purpose of the track matte. the matte will track your photo.
Sounds like you do not want the track matte, but want a template to frame photo2. You can create the shape in Photoshop elements if you have this. That is a whole other tutorial to explain this.
Instead of the Track Matte Key, for what I think Jan is after, I'd look into the Crop Effect. One can add the Crop Effect to say the right side of the Clip on VT1, making it half-width on the screen on the left. Just the opposite Crop Effect would be applied to the Clip on VT2, making it fill the right half of the screen. Individual and independent Pans & Zooms can be applied to each Clip, and they will function in their respective screen halves. Motion>Position will probably have to be applied at setup, prior to Pans & Zooms, to get the area that is needed.
Or, one could do two Track Matte Keys, one for each Clip, giving VT1 thru VT4.
Basically what is done is two PiP's, with each one occupying half of the screen.
Hope I didn't miss something here, but I'm sure that any necessary corrections will be posted in no time.