Given my previous bug report, there might be some problem with SOLs in general, rather than just picking topmost objects.
In the attached cap, all Sprites overlapping both Mask and Cursor are highlighted, rather than just the topmost one, despite the second condition of event 3. Even R0J0hound's workaround (use overlap at offset (0,0)) doesn't help (By the way, thank you, R0J0).
The same thing happens if all conditions from events 2 and 3 are placed in one event.
I does work if you replace both "is overlapping" with "overlapping at offset (0,0)".
The condition:
+ Sprite: Sprite overlaps Cursor
works exactly like:
+ System: For each Sprite
+ Sprite: overlaps Cursor : offset (0,0)
Apparently I was too stupid to try replacing BOTH conditions with 'overlaps at offset'. Thanks again, R0J0!