We present a low temperature X-ray photoemission electron microscopy study of the bi-layered manganite compound La1.2Sr1.8Mn2O7 (BL-LSMO) to investigate the influence of stacking faults, which are structurally and magnetically different from the bi-layered host. In BL-LSMO small magnetic moment persists to T* = 300K, well above the Curie temperature of 120K (TC). Our magnetic images show that 3D stacking faults are responsible for the T* transition. Furthermore, close to the TC, stacking faults are well coupled to the bi-layered host with latter magnetic domains controlling the spin direction of the stacking faults. Contrary to recent reports, we find that stacking faults do not seed magnetic domains in the host via an exchange spring mechanism and the intrinsic TC of the BL-LSMO is not lower than 120K. Show Partial Abstract