One more thing: this is broken on 59 as well. I'm using Chrome 60 beta because it has better iframe debugging.

As per comment #6&7 in-house team not having the permission to create a local host.Adding respective label to triage the issue further.

Thank You! 

Correction : Point #6&7.

Does the scenario work well if the secondary monitor is placed at the right or bottom of the primary monitor?

I'll check this first thing tomorrow morning.
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I tried all arranging the monitors in all cardinal directions (i.e. primary
monitor top, bottom, left, and right) and all exhibited the same
problematic behavior.
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I have an updated/easier reproduction case so you don't have to run your own server.

All the code is in this repository: https://github.com/StreakYC/brokenIframe

New steps:

1. Use a retina macbook pro (I have a late 2013 15" model)
2. Connect monitor to Apple Thunderbolt Display
3. download the github repo zip (https://github.com/StreakYC/brokenIframe/archive/master.zip) and unzip it to a local folder
4. install brokenIframe folder as an unpacked extension
5. go to https://github.com/StreakYC/brokenIframe
6. You'll see the yellow modal come up and if nothing further happens that means a pop-up got blocked. Look at the address bar and go to the pop-up and authorize the app
7. the drive picker interface should now load up and be interactive
8. move the tab to the other monitor
9. notice that the drive picker interface is no longer interactive
10. move the tab back to the original monitor and notice the drive picker interface is interactive again

I did a bisect and ended up finding the range below. It is already fixed in Chrome 61 which is our best candidate to fix this in. Try a dev or canary version and you will see it no longer reproduces.

This is likely fixed by lfg@'s change because it is sending a resize event when the frame moves off a hidpi display to a low dpi display and vice versa.

https://chromium.googlesource.com/chromium/src/+/95f00bd53528fee18ef3ccaa08690c6a1996045d

You are probably looking for a change made after 477789 (known bad), but no later than 477820 (first known good).
CHANGELOG URL:
  https://chromium.googlesource.com/chromium/src/+log/e164e3ceab4dd13fb4e240e5d663e8ddb43b2a03..2b07f89b0ab15ff76a01ede77d347e90bdcc6582

Thanks for the update! Since Chrome 61 is a couple of months away from stable is there anything we can do on our side in js/css/html to work around the issue (with the constraint that we still need the double embedded iframe structure)?