I have no idea why that happens with Squish and I never usually play with those options you mentioned. All games should work the same way and I haven't defined anything that would disable overlays when you switch views. Guess it's a MAME issue itself?
The white outline is a screen fix which fills a black gap when you have the bezels enabled. If you go back a few posts you'll see I started using it a couple of times after working on Oil Panic and encountering a problem. It can be removed if you go in the layout file and removing the screen fix lines but you'll get the black gaps.
The animated buttons aren't in the dual screen games, or those red switches in the likes of Squish. I don't know how to draw the d-pad or switches in other positions so didn't bother with any of those games at all, but I may do Black Jack and the yellow SMB sometime.