Hi Tassilo,

Thank you for the quick fix.

>>> Problem 1: the overlay context does not have font-lock, since
>>> font-lock was not applied to the previous area that contains the
>>> context.
>
> I now ensure the region is font-locked before taking the
> buffer-substring(s).
>

I confirm that problem #1 is fixed.

>>> Problem 2: the overlay context will be displayed with the same
>>> background color as the top-left line of the window (yellow, in this
>>> case, because of whitespace-mode).
>
> I now set the overlay priority to (the very high) show-paren-priority
> which seems to do the trick.

I can still reproduce the problem #2, where the overlay context use the
same face of the top-left line.  I suspect the issue is related to the
overlay face, not with overlay priority (but we can keep your fix that
set the overlay priority).

A simpler recipe to reproduce the issue is to make sure the first
character of the top-left line is a comment, so the overlay context will
be displayed in that face (font-lock-comment-face).  See the attached
images, where I put a comment ("/* EXAMPLE COMMENT */") in the top-left
line and the context overlay was displayed in that face.