Hi
Check the position of your overlay and also the vertical margin setting. (The button to the left of the green chroma button). By default, the overlay image is placed in the subtitle position. Right click the overlay to get the control window up and make sure that the central square on the arrow block is clicked. When the size slider is moved fully to the right the overlay and main frame are the same size but if the margin settings are not zero , there will be a gap at the top or bottom or either side (depending on the position setting)
You need to check the central box for the overlay to be central and the margin settings should be zero.
Hope this helps.
Nat