Eli Zaretskii <eliz@gnu.org> writes:
>
> It should be enough to provide some text to serve as buffer contents,
> and a Lisp function to put the overlay on that text, such that Emacs
> stops responding.

I think the OP already provided those.  Here's some elisp code to
reproduce the problem based on the description (some adjustment may be
needed depending on display width):