The automatic overwriting process for a hosted feature service published from a cloud drive is not updating the hosted feature service in ArcGIS Online.
This feature is functioning as expected. To update a feature layer published from a cloud drive file, after overwriting the source file in their cloud drive, the user must navigate to the item details page for the layer they want to update, select Update Data > Overwrite Entire Layer. A window will prompt the user to log in to their cloud storage provider, and then the feature layer will then be overwritten by the new data (assuming the new file has the same filename as what was originally used to publish.)