Component Overlap Warning for Version 4.0.4 and later
This error occurs because we use a bounding box to test overlaps. Circles are particularly bad because a bounding box around a circle leaves a lot of 'dead space' where components can't be placed without a DRC being issued.
The bounding box method for testing component overlaps will still be the default behavior for PCB123.
A new optional method for testing component overlaps is available. If you draw a closed polygon or circle on an assembly layer, and name that poly "EXTENT", then the DRC will use that poly as the bounds for checking overlaps. If you specify this poly as a circle, the circle is approximated as a polygon, so you won't have any 'dead space' around it.
(If the EXTENT poly is not closed, or it is an arc, then the DRC will revert back to using the bounding box method.)