I would imagine those parts are custom machined by the manufacture. For bonded, one would like a long overlap, but for welded, it really needs to be just larger than the weld, and perhaps heat affected area. Just some back support for the weld and helping with alignment. It could also be hollowed out.

It may well be easier to weld without a huge block behind the weld.

But, I'm guessing closer to 1/4" overlap, but don't want to cut open a frame to see.

You may be right, catastrophic may not be the right word. wheel rubbing on chainstays/seatstays/brakes?

Still, with a known fault, it is something I'd ignore as it could get worse while riding. Also, a quick repair becomes a nightmare repair.