Hi
The image overlay, as you correctly say can be placed in one of nine positions in the frame. It can be resized but its position will not change relative to the moving scene behind it i.e. the video clip placed on the sequence track.
It would seem from what you are saying that you would like the overlay to move with the video to keep a particular part of that video hidden. I don't think this can be done per se. (But I am quite willing to be shot down on this.)
The nearest effect that you might obtain that I can think of is to load your video clip as an overlay. Make it full size and set it against against a blank clip on the main sequence track. Then use the chroma key effect to "blank out" the section that you dont want seen in the overlay. (This will have to be done first) Unfortunately this will only work on an area (or more specifically AREAS) with a specific colour and furthermore you cannot define the perimeter of the area that you want to blank. So in general I am pretty sure it won't be of much use. The idea is that the overlay will play as the actual clip, with the chroma part transparent allowing the blank main sequence clip to show through.
The problem with the idea is that other areas of the image with the same hue also behave in the same way.
Perhaps somebody else can suggest an alternative.....This is far from an ideal solution. 
Nat