I think identifying chart inaccuracies is probably the best use of radar overlay, and your example of Mexico is a classic. I don't care for overlay otherwise, finding that the radar return tends to obscure chart features, and chart features obscure radar returns.
As for alignment, there are a couple that I am aware of.
First is that the heading sensor needs to be aligned with the boat's actual heading. So if the sensor says the boat is pointing due north, the boat needs to actually be pointing due north. All the sensors I have encountered have adjustment provisions, assuming the sensor has been installed to already be in pretty close alignment.
The second adjustment is telling the radar when it's aligned with teh boat's heading, i.e. pointing straight ahead. Again, when installed you need to physically sling the radar with the bow of the boat, and all I have encountered then have configuration adjustments to make corrects so it's spot on.
Assuming you are in an area with known good charting, the overlay should then be spot on. If not, it's because one or both the compass and radar are not aligned correctly.
On commercial radars, there is one other adjustment that tweaks the distance to a target, but I haven't seen that on pleasure boat radars.