It is possible. Activate the column mode. Select a rectangular area (can be much to wide) and copy it. Turn on overstrike mode and move the cursor to new position. Paste there the text. The pasted text will overwrite the existing characters of that area. The existing characters on left side of the cursor and the existing characters right the pasted area are not modified. The configuration setting Overstrike at Editor - Column Mode must be set correct for that task. Trim trailing spaces should be used before or on save when doing such text manipulations in column mode.
But in normal text edit mode a pasted text is always inserted and does not replace the lines below even in overstrike mode. I think this is a Windows standard. Microsoft Word for example works in the same behavior. If IDM ever implements a paste + replace in normal edit mode when overstrike mode is active then this behavior will be hopefully controlled via a configuration setting set by default to insert the text also in overstrike mode as it is actually standard.
If you would need that often in normal text mode you could write a script with a hotkey. This script could check if overstrike mode is active or not. If insert mode in normal edit mode or column mode or hex edit mode is active it just pastes the text from the active clipboard. If overstrike mode in normal edit mode is active it remembers current cursor position, counts the new line characters in active clipboard, selects the same number of lines (or less if there are not so many lines left) and paste the text over the selected lines. Then it moves the cursor back to original, stored position. Such a script would be a fully customized replacement for standard Ctrl+V.