Mike Stop Continues - if you're going to the effort to do an overlay, why not just stick a whole opaque knob image on the overlay? Then you can gleefully not give a damn about what happens underneath. Score (?)
On the subject of dual, fully variable concentric knobs - I've worked on plugins with them, and plugins where they were tried and dismissed ...unless you can really put a lot of screen space over to doing it well, I have found them to be a far from satisfying to use. And then you don't save any space, if that was your goal
I would say the current state of play with LVG is indeed that it is an extremely promising development that could well go somewhere incredible in time. I promise, I'll report in on what it can do now when I have time, but don't get too excited at this point.