QBix, this is a very nice addition that I suspect users will find many uses for. Thanks!
I took some time to understand the overlay mount with various content on my linux system. (many of my comments repeat what you've already mentioned above or in the source code.. but I'm just mentioning them to add context).
The overlay doesn't recognize lowercase, so any overlay filenames containing lowercase won't appear when you mount the overlay.
Comment: this makes it harder to manage overlay content outside of DOSBox, because you might have to rename some or many files and directories. Yes, it can be scripted, but DOSBox already honors lowercase files provided by the native filesystem, so this feels inconsistent.
Overlay directory trees won't appear unless the same tree exists in the base directory. This means you need to pre-make the directory scaffolding in your base directory before DOSBox will honor it in the overlay.
Comment: This makes it impossible to preserve games' install directories in unadulterated states because the base directory needs the same tree of added directories, such as save games, high scores, and various temp / dpmi / swap directories.
It also means that for users who want to add content to the overlay (in my case, CDROM images and compressed audio tree, which I imgmount inside DOSBox), I have to mirror this directory structure inside my base game directory for the overlay to honor it, which pollutes it.
I would like to see the overlay's functionally expanded (or made less restrictive?) to honor lowercase and honor directory trees as-is without requiring a mirror-tree in the base, exactly likely DOSBox already handles mount content (except with the overlay-content simply 'taking president').
I know you're still working on it, so apologies if these are already in your queue!