The "cut copy paste select all" popup is displayed by the system -- by HTC's modifications to Android system code. I can't move or resize it.
Stock Android overlays those icons on the window's title bar (e.g. if you select one or more messages in a message list -- the "mark read" etc. icons), so there is no issue with overlap -- but HTC (and LG) decided to do things a little differently.
The exact shape size and location of this "cut copy paste select all" popup is determined by HTC's (and LG's) modifications, according to what *they* think is best for the user experience. They can change it at any time for any reason.
It's always displayed *on top of* application content.
Overall, I feel that the option to move my formatting bar to the bottom is the best solution, if you consider the uncertainties.
On new AquaMail installs, on HTC and LG devices, the "bottom" location is the initial default (no change for other manufacturers).