Thank you for trying this.
I made all my buttons as components with hover.
The mistake I made was when I linked my button to the 3rd artboard with the sub list I didn't choose the overlay as you did.
I had created a mask for the sublist to give drop-down animation. Now I'm not getting a black screen. but my animation for dropdown is not good. I chose dissolve option. So it is uploading the menu again entirely.

Yeah, well, Xd is still a bit clunky with these things, if you transition between 2 overlays it kinda removes the first one, and then starts the animation for the second one. There isn't an overlap between them at any point.
As a result you get this cutoff when switching overlays, and the smoothest thing you can get is to have no transition animation between them which looks the most seamless, but yes - you can't use auto-animate and overlay at the same time.
The only way to do this with a nice animation and proper functionality would be separate screens that have the different versions of the menu, so for each of your screens you need to have like 3-4 more with the different menu sections, and that I imagine would be a nightmare. I would do it for one screen to show the animation, and have the overlays with no animation for the rest of the prototype.
As a whole right now Xd is more suitable for testing user flows / wireframes, maybe some animations, but not a fully-fledged prototype with advanced animations / interactions.
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