Why did you say "Yellow did not become overlapped from astern (she was ahead)."? Blue came from astern to pass to windward, at some point they were overlapped. What am I missing?
The boats became overlapped, but Yellow was not astern - she was ahead. Let's take a look at the rule in question:
If a boat clear astern becomes overlapped within two of her boat lengths to leeward of a boat on the same tack, she shall not...
Yellow was not clear astern before she became overlapped, so rule 17 does not apply to her. Blue was clear astern before becoming overlapped, but she became overlapped to windward (not leeward) of Yellow, so rule 17 does not apply to her either. Neither boat was restricted from sailing above her proper course.
I hope that helps,
Eric