And then use mkfs.ext4 /dev/mmcblk0p1 (assuming this is your sd card, always double check) to format it in case there are orphaned/older packages from a older version of OpenWrt otherwise you may get into compatibility issues/softlocks, it litterly does what it says overlaying the current partition, on my Mochabin that is one reason why I splitted partitions to not lose all files
Now what you need to get is a opkg called block-mount and then you type block detect | uci import fstab this generate a mount configuration on /etc/config/fstab.
Now what you need to edit is:
You copy the entries of the mmc and the only thing you change is target '/overlay' and enabled to 1, then reboot.
On my Mochabin this works fine , I think the wiki mentoid above also describes this.