According to GIT's history, I haven't worked on this class for over a year and what I did back then was just adding the option to set an initial matrix, which can't possibly cause this.
Overlays are basically planes (i.e. Object3Ds), and as such they aren't treated any different than other objects. Transparent objects should be sorted to the back and drawn last. The sorting code itself hasn't changed for ages either. So I don't see what I should have done to break this...it works fine in my Overlay test case as well.
Are you setting a depth for the Overlay? Try something like overlay.setDepth(0) and see if that helps. Are you modifying Config.nearPlane and if so, are you creating the overlay before or after that?