Overlapping UVs are normal. What you are doing is building a light map, which uses it’s own set of non overlapping UVs.
check what lightmap is in use for the mesh in each LOD.
When making changes to the LOD don’t forget to click apply.
unreal by default places/builds the lightmap on channel 1.
the default channel 0 therefore has your normal/overlapping Uvs used for texturing while channel 1, your lightmap is expected NOT to overlap because of the way that lights are baked.
You can force the engine to re-generate its own lightmap on the channel you want and make use of that by defining it as the lightmap index.
Sometimes it’s faster to export the asset and edit it in Blender.
the important part is to make sure you properly unwrap the mesh for the purpose of light building in the correct channel.
A few basic seams and unwrap with at least .2 distance on the islands usually works when doing it manually.