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This is because the colour overlay's blending mode (or any layer effect's) is a standard Normal. It's rather counterintuitive, but that Normal does not obey the layer's owen blending mode. The overlay you see is therefore a regular red with blending mode Normal. You can fix this by going into the layer effects dialog box and changing the effect's blending ...


That's an optical illusion - if you zoom in really close, you'll notice that the shadow is actually the same, but because of the higher contrast between the white part and the shadow, it seems to have a contour that the blue part does not (at least that's what it looks like for me). What you can do (it's a bit of a workaround, I know) is: Apply a Stroke ...


The blue color is getting merged with the shadow effect. Try to change the contour from the drop shadow wizard

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