Can you provide a screenshot of your form in the designer with the Document Outline window open so we can clearly see the control hierarchy? It might take a bit of experimentation but I'd expect that by manipulating a TableLayoutPanel (which you appear to be using already) and a FlowLayoutPanel, you could get it to behave.

As for the difference between design and actually running the app, I suspect that it's using GDI to draw in one case and GDI+ in the other.