I'm not a big fan of writing directly to the parts of the overlay system. Too much magic going on for me to trust that I've gotten the state properly updated. Mounting it as an overlay (over nothing) would probably be more robust. See Script: Mount "Alternate" NAND Firmware (Linksys +?) for one sketch of how to mount an overlay-intended file system and then apply it as an overlay (over an empty "lower", if you want "everything" copied). (I'm not sure you're writing to an overlay-intended file system. Reading from one that is not mounted as an overlay (and was cleanly unmounted) should be OK to extract the changes.)
"Better"? Probably something like building a kernel and system that runs natively off the USB file system. Worth the time on a TD-W8970? Personal decision.