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To fix this you must first turn Game DVR back on from the Xbox app. Then run any steam game in Windowed mode and press Win + G. This will bring up the Xbox game bar. Towards the right of the bar there is a gear icon. This brings up a unique settings menu not found in the main Xbox app. There will be a checked option that says "Open game bar when pressing (Home button) on a controller". Un check that box! Your Steam overlay will work!
Just wanted to give a little update, since the app has def seen some changes in the last 4 years.
1- in win10 uncheck "Open game bar when pressing (Home button) on a controller" in settings/xbox game bar
2- in steam check "Use the Big Picture Overlay when using Steam Input enabled controller from the desktop" in settings/in-game