From my tests, you can overlap 2 pixels of any direction (up,down,left and right) without problems, more than that you have the overlap glitch.
The problem, even the blank pixels overlap the graphics (see the image, green pixels is the overlapped ones).
I've talk with Kevtris about it (because he implement O2 in a FPGA, so he knows the internals timings) and he suggest to not do it as the timings are very sensible and the game could crash.
I recommend you to read his doc about hardware timings, there is a lot of useful information if you want to push the hardware to it limits.
Kevtris Doc :
http://videopac.nl/forum/index.php?topic=1751.0 I think even invisible chars still collide as it not based on pixels, but on X & Y position on screen.