I'm having the same kind of problem with my iBook G4 -- ie: larger overlays appear garbled. Here's my graphics card info:

ATI Mobility Radeon 9550:

Chipset Model: ATY,M12
Type: Display
Bus: AGP
VRAM (Total): 32 MB
Vendor: ATI (0x1002)
Device ID: 0x4e56
Revision ID: 0x0080
ROM Revision: 113-xxxxx-117

I can display an 800x580 ground overlay image properly, but when I try a 1604x1227, I get a garbled image.

Peter.