Yes it is. It is also an Octo line. We had this working when it was a dual-line. I know that OCTO and overlay do not mix, but I also know that we can add OCTO DN's to other phones...
The wierd thing is that I added that DN to a button on a 7960 in the office here (on LAN) and that worked - rang in both places etc., then went CFNA to my voice mail. All is good.
Then tried the same thing on another 7960 that is tagged as a remote worker in CCA and is accross the WAN behind an SR520, and it moved my extension 201 to that phone and disabled it on my 7975 - ouch - good thing we did not wri mem.
I just want the 201 to ring on two phones simulanteously one phone on the LAN, one over the WAN behind a SR520, and then go CFNA to my voice mail.
From the perspective of the UC500 it doesn't really know that it's remote or local. The only change when you mark a phone as a teleworker is that it adds a "mtp" under the ephone so all voice calls b/w ip phones registered to the UC500 would go through the UC500 instead directly from phone to phone.
There shouldn't be anything special to create a shared line. As long as extension 201 is a "Share" type instead of normal there shouldn't be a problem adding it to the 7960. I'm thinking that maybe there may be a sequence of events that you're configuring it may possibly cause this. If you can get a recording of the steps that you go through to reproduce this that would greatly help me track this down. I don't know how easy that is, but if not it may be better to call up technical support to get someone live to see what's going on.