Not a bug
BYOND Version:486
Operating System:Windows XP Home
Web Browser:Firefox 4.0.1
Applies to:Dream Seeker
Status: Not a bug

This is not a bug. It may be an incorrect use of syntax or a limitation in the software. For further discussion on the matter, please consult the BYOND Developer forums.
Descriptive Problem Summary:
Image overlays don't seem to obey the mouse_opacity of whatever they're attached to.

Numbered Steps to Reproduce Problem:
Create two objects in the same location.
Set the lower object's mouse_opacity to 1.
Set the higher object's mouse_opacity to 2.
Add an image overlay to the lower object with a layer higher than the higher object.
Click() the image overlay of the lower object which is displayed over the higher object.

Expected Results:
The higher object should catch Click().

Actual Results:
The lower object is catching Click().

Bug Demo
Does this apply only to /image objects or do regular overlays have the same issue?
I went and tested it, seems to be overlays in general having the issue rather than just /image objects.
Okay, good to know. That makes sense to me. It's probably an issue with the hit test itself.

I'm not entirely sure this counts as a bug because mouse_opacity=1 on the first icon hit should mean that icon gets the mouse hit, but I'll look at this in more detail to be sure.
Hmm, I guess you're right about that.

Perhaps mouse_opacity needs a third setting where that object is hit regardless of what else is occupying the same location.