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I had previously disabled Game DVR from the Xbox app, but the steam overlay still did not work.
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 again!
You can leave the Xbox Game DVR on if you like, you will just have to use the keyboad shortcuts in order to record. Hope this helps someone!
This works! Nice to get my overlay back