Created attachment 102639 [details]
This file has a layer with semitransparent strokes and a color overlay layer style in Normal blending mode.

The strokes are in green and the color overlay is a blue color. There are visible green fringes in the semitransparent areas of the stroke. These areas should be blue, not green.

The correct behavior for the color overlay layer style in normal blending mode should be functionally equivalent to grouping the layer and adding a fill layer with the color blue set to inherit alpha.

I've also noticed this problem on the inner glow layer style (I think.)

Color overlay layer style is pretty handy in some texture art situations, for example making a specular power texture for a gun skin for Counter-Strike: Global Offensive. Specular power textures have big flat areas, and the exact values required to produce the correct effect can be somewhat unpredictable. Color overlay is a lot more concise and easy to change than making another group for specular power and adding a bunch of clone layers from the main layer stack and putting color fill layers with inherit alpha over those clone layers. To pack the specular power into the alpha channel of the texture (which is the format that the game engine expects), you select all layers, enable layer effects in the layer properties, copy merged, paste, move the layer to the top, and convert that merged layer to a transparency mask.

Inner (and outer) glow is useful to make certain types of alphas for Zbrush sculpting, or to convert line art to signed distance fields for crisp line art rendering in a non-photorealistic renderer without having to use nearest-neighbor filtering and broken-up texture coordinates.