While reading through livecd-iso-to-disk, it was noticed that in the Makefile, on line 362, resetmbr was being used -- which makes livecd-iso-to-disk exit as false and does not allow the write to happen.
Changing resetmbr to resetMBR allows the filesystem to be written with an overlay of varying size.# Please enter the commit message for your changes. Lines starting
CLIP: Creates live usb with persistent overlays and home directories.