FYI The problem was in the InkToggleAction widget itself.
When it creates the initial icon it wraps the icon in a GtkAlignment to ensure the icon doesn't resize to fill the whole button's space. But when the button is toggled , the new icon was not wrapped in a GtkAlignment - so was expanding to fill the whole buttons space (might have noticed the icon was blurry). Simple fix is to do the same wrapping when the new icon is set.
Fix committed as r11701.
FYI The problem was in the InkToggleAction widget itself.
When it creates the initial icon it wraps the icon in a GtkAlignment to ensure the icon doesn't resize to fill the whole button's space. But when the button is toggled , the new icon was not wrapped in a GtkAlignment - so was expanding to fill the whole buttons space (might have noticed the icon was blurry). Simple fix is to do the same wrapping when the new icon is set.