Just curious, Greg, that the recorded version you posted does not appear to specify the font name as your manually-coded one does. Perhaps something in "clear formatting" takes care of that? (You can see how much I know about VBA...)
Trying to think through the potential cause, I can only come up with a conflict between style and local formatting, but don't know why Word wouldn't recognize the "overlay" font anyway. Will be interested to follow the thread.