How far can you differ from the pet you are putting the overlay on? Like if I wanted to have an (official) custom overlay (not just a coding one on the profile) for Fairy, could I just make it any kind of bug, since she is an illumis? Like a beetle or something? THIS is my current design for her. Provided the art was subeta quality, would the design be acceptable or are there some other guidelines? I couldn't find anything about it on the official page.

As far as I'm aware the only rules are not to falsify the pet (so you couldn't have an obviously galactic telenine overlay on top of a common kumos) and make sure it doesn't break any copyright laws: 4 changes away from the original design if fan art. No traditional work, digital only, and no humans / humanoids, anthros acceptable but not with human faces.

You'd be fine with that design.

Some of mine for comparison/examples

Actual Colour -v- Overlay