I do overlays for customers from time to time. I sand flat first. Get all the art off. Then clear flat. Sand again except over inserts (you want inserts to be clear here, so you can see them through the overlay) then apply overlay. then clear 3 more times. while block sanding between layers.

yes, rattle can type clears do not work well with overlays. I've done several for people over the years, and they always lasted.