Suggests that the /overlay partition isn't working as expected, which can be caused by insufficient flash.
Seeing that the overlay filesystem is (or isn't) mouted, such as:
jeff@office:~$ mount
/dev/root on /rom type squashfs (ro,relatime)
proc on /proc type proc (rw,nosuid,nodev,noexec,noatime)
sysfs on /sys type sysfs (rw,nosuid,nodev,noexec,noatime)
tmpfs on /tmp type tmpfs (rw,nosuid,nodev,noatime)
/dev/mtdblock3 on /overlay type jffs2 (rw,noatime)
overlayfs:/overlay on / type overlay (rw,noatime,lowerdir=/,upperdir=/overlay/upper,workdir=/overlay/work)
tmpfs on /dev type tmpfs (rw,nosuid,relatime,size=512k,mode=755)
devpts on /dev/pts type devpts (rw,nosuid,noexec,relatime,mode=600,ptmxmode=000)
debugfs on /sys/kernel/debug type debugfs (rw,noatime)
I know the desire to stick with what you've already got (owning and running five, somewhat outdated Archer C7s myself). At some point the $/€20 or so for a current, 802.11ac router may be less painful to spend than the hours in getting it running on an older device, the performance limits that the older wireless technologies put on the entire network, and the potential problems if/when the underpowered devices unexpectedly crash or freeze.
There are many opinions on inexpensive devices in the long thread