Colin, examine closely the last sentence of Definition Clear Astern and Clear Ahead; Overlap

Well, the difficult point is to convince the jury that the overlap was brocken before entering the zone. 
If the jury is not convinced, it will consider the overlap has not been brocken, and it will DSQ Y for breaking 18.2.b

A less then Corinthian manner of gaining tactical advantage at the circle entrance.  I would advise a skipper or tactician against this type of maneuver because they will enter the protest hearing with a 50% chance of winning and a DSQ will be the result of losing the hearing.  The reason is because of the following rule.

18.2.e If there is a reasonable doubt that a boat obtained or broke an overlap at the time, it shall be presumed that she did not.

After reading the last sentence of overlap definition, how  does the maneuver effect the overlap between the boats?

Why wouldn't it be ok? :) In more or less the same way, if 17 is off on the run, the windward boat can break an overlap by luffing, and turn 17 on when she turns back down. 

Like you said, the difficult bit is convincing the PC, or the umpires, that you were clear ahead when entering the zone. Always risky to leave the race in the hands of the pc/umpires, because you can never know for sure which way it goes. But if the risk is on balance worth it for some reason and you really need to have the other boat a couple of lengths behind you, then by all means :)

Easier and safer would be to do that double gybe move earlier (if 17 was on) and luff blue well on the right side of the mark, gybe first and enter the zone on starboard. Then it would be clear(er) that you were in the zone first and clear ahead. (If no 17, then no need for the first gybes :) )

My bad .. the dark blue color made it hard for me to distinguish the numbers correctly.

This happens in nearly every team race at mark 3...or something very close

As a practical matter, it is difficult to establish through testimony that the turn was done in a manner that Y broke the overlap, and then entered the zone before the overlap was re-establlshed by Y's turn back to the mark. I think that in this circumstance, the PC is likely to rely on the presumption of 18(e), and rule that Y did not break B's O/L For that reason, I would think that this maneuver is likely best reserved for team racing, when experienced umpires will be looking for precisely this move.

What Graham said. 18.2(e) effectively makes this impossible unless there is a circle drawn on the water. It ALMOST adds another boat length to the zone.

A jury would ask the contestants as to the time/distance before the mark that they were agreed they were or were not overlapped.  This is helpful when deciding how to apply RRS 18 (e).

I would make it simpler.
Inside boat have right of mark room. As a principle.
Unless 18.2b
18.2 b, (to make it simple):  external boat, to take away the mark room right from inside boat, she must 
a) enter the zone before inside boat 
AND 
b) be clear ahead of the inside boat. 
Both conditions. 
In the example, the inside boat enter first, not the outside, so the hell with 182b, overlap or not.

I agree with Catalan because under 18.2(e), Yellow must provide persuasive credible evidence that she broke Blue's O/L when she was outside the zone. IMO, that will be difficult unless there are independent witnesses whose testimony is sufficient to overcome the presumption of 18.2(e).