Overlap is for exhaust scavenging and cylinder filling. Most beneficial on the high side of the RPM band. It helps fill the cylinder with the fresh charge, and the fresh charge makes it easier for the exhaust to leave.
Ya know, I think you guys could really benefit from cruising around the high horsepower sites, because a lot of the tricks used to get max power out of an engine could be used to improve fuel economy. For example, I'm looking at a header install on my engine, supposed to add a full second and a 20 percent fuel economy increase to my engine. I believe it too, because my manifolds are horribly restrictive.
If you were to get a cam that has less overlap and were timed to open the intake as close to TDC as possible on the intake stroke, and be completely closed just after the piston started moving back up on the compression stroke, it would be the equivilent of adding about 1 atmosphere of compression to the engine. On average each atmosphere in compression will add 30HP to the average Chevy 350, so would add a smaller amount to a smaller engine. Each atmosphere theoretically would also add another MPG or 2 to that 350, should add more to a smaller engine. I have no proof of this, someone would have to test it out.
Here's a site with a lot of math on how cams work and the different effects. And,
this article describes the effects of using a longer connecting rod, shorter stroke and larger piston on an engine. By building a 350 using a 4.155 inch piston, 6.2 inch connecting rods and a 3.25 inch stroke instead of the factory's 4 inch bore, 5.7 connecting rods 3.48 stroke, they were able to run a much higher compression with no detonation on cat piss fuel. Run the same compression on a standard 350, and you have to run octane booster. In theory, since the new long rod config makes more power, it will use less fuel to maintain a specific speed than the short rod version would. Both have the same cubes, but one is more efficient. I have no idea how the smaller engines most people here have would be able to use all these tricks without custom parts, but no telling what someone might be able to come up with.
Food for thought.