The overlay we are talking about is just the one FR initrd makes at boot time, which merges together (like graphic layers) several sfs files to become one resulting root filesystem for vmlinuz to use. It thereafter behaves like a normal Linux so you can mount as many other filesystems as you like, but these are separate mount points and not further 'merged-in' as if a graphic layer. Rather they hang on the mountpoint wherever it is so you can't over-write existing files with these later mounts.
In the FR initrd boot one directory specially named upper_changes is also merged in, but at the very topmost layer and is the writeable (as well as readable). Anything named with 2-digit number is treated by FR initrd as layer and mounted during boot, but as read-only layers in order of the number and then upper_changes directory (a single directory) is topmost layer (readable and writeable).
Prior to booting you can take an existing upper_changes and rename it to say 40upper_changes and therefore on booting whatever is in it will simply then be loaded as a layer at whatever numeric position you gave it (where it will be read but not writable. The only part of these numbered files or directories that is important is the 2-digit number; so you could change 60upper_changes to 60anyjunk and that's fine too. But then a new upper_changes special named directory will be auto-created by FR initrd and again that now empty dir will be used at topmost layer and read/writable.
With the system thus booted, in w_changes=RAM2 mode, that external on media upper_changes directory is mounted by FR initrd to a directory created at /mnt/layers/uc_ro (the name uc_ro wasn't well chosen since uc is actually readable and writable during RAM2 mode).
EDIT: oops had above a bit wrong. The temporary, in RAM changes are stored at /mnt/layers/RAM/upper_changes in originally empty hierarchy in form /root, /etc, /usr and so on, and it is these that are rsync'd by snapmergepuppy (when so demanded) back to writable /mnt/layers/uc_ro, which is the mounted rw external media upper_changes folder. Hence these rsyncd in changes become available still on reboot.