The adverb overly has a long history of use in English, but it’s usually unnecessary. The prefix over- conveys the same meaning as overly, and it can be attached (without a hyphen) to any common adjective.
Here are a few examples of overly constructions that could be made less wordy with the prefix over-:
Sure, compensation—particularly pensions and benefits—for many public employees is overly generous [overgenerous]. [Kansas City Star (article now offline)]
The result is an overly autotuned [overautotuned] dance track. [New York Post]
[T]he question of whether government unions are good or bad is overly simplistic [oversimplistic]. [Baltimore Sun]
Overly caffeinated [overcaffeinated] San Francisco … is ground zero for the current coffee craze. [San Francisco Chronicle]
If your spell-check catches over- coinages such as overcaffeinated and oversimplistic (as ours does), pay it no heed. These are perfectly good words.