Tip overlays can be decorative, support and strengthen the tips, or both. There's no requirement that the overlay must be harder, but if it is reinforcing the limb tip it works better if it is. I put mesquite overlays on my osage bows for looks, the mesquite is a softer wood than osage. If you're going to shoot fast flight string, the overlay can be very important by helping prevent the string from cutting into the bow back. However, in my case they are purely ornamental.
George