In preferences/event display, the “show overlaps - on mouse over” function behaves like “always”
This has been a bug since “forever”… For many years and Cubase versions this has NOT been working as expected 
Yes. Didn’t work as expected in C11.xx and still not working in C12… 
I don’t know if this issue will ever be solved, there are posts from the Cubase 10 era and it was already broken… At least Steinberg, if you think this isn’t fixable, don’t leave things like this, simply remove the drop-down menu and just put a checkbox instead so that people won’t be confused by things that do no work.
Here are some screenshots just in case :
Show Overlaps = Never :
Show Overlaps = Always :
Show Overlaps = On Mouse Over :
Not working, behaves the same as Always.
The overlaps should only be displayed when the pointer is over them.
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12.0.50 … nothing’s changed 
13…still nothing