The target gizmo, better known as the donut, is officially called the Content Grabber and can be turned off in the View > Extras menu.
Nothing else has change about haw you size things by gragging a handle, so maybe you should give us some details...
I've had this happen before. Sizing the photo by the corner doesn't seem to be cosistent. I have an 8 pt border on the photos and sometimes the photo resizes when I drag by the corner, sometimes only the border resizes, and sometimes a gap develops between the border of the photo and the content. The variation seems random and has not been happening like this for months now and I can no longer remember what I did the last time this started happening.
You need to hold the Ctrl (Windows) or Cmd (Mac) key while dragging to size the content along with the frame. Add Shift if you want to keep it proportional. On Windows, it seems necessary sinf around CS4 to hold the Ctrl key down before clicking the mouse.