This is a known effect of DARTEL. The data within the brain is fine and you can use a mask to eliminate the parts outside the brain. This is based on the following comments.
I have collected a series of fMRI data for analysis in SPM8. BOLD scans were acquired 3x3x4mm with a slice orientation aligned with the anterior-posterior commissure. All subjects had a little clipping (3 or 4mm) off of the very top of the parietal cortex due the the bounding box size/positioning during acquisition.
Data were preprocessed up to normalization in SPM8 using a standard preprocessing stream. When I look at the raw BOLD images up to the motion corrected images, the brains look perfectly fine - save for signal dropout there are no strange distortions in the images. When I run MNI normalization and smoothing (6mm FWHM) using SPM8's built in functionality, nothing bad comes of it and the swua images look fine as well.
However, when I run normalization/smoothing using DARTEL instead of SPM's built in functionality, I get a strange vertical expansion artifact coming out of the top of the functional brain - seemingly around the point of the scanner bounding box cut-off, although perhaps this is just a coincidence.
I've attempted to attach images of 1) a "healthy" raw image, 2) a "healthy" normalized and smoothed image using SPM8's functionality, and 3) a distorted normalized and smoothed image generated by DARTEL for one subject
If anyone has any experience with this I'd really appreciate the help!