Overlap as in? I do need to create my own illustrations by adding content on the images for clear instructions. Are you suggesting that I do that process in Photoshop, and then export the image as JPEG/PNG to use it in the InDesign Application at the end?
The other question that I have is - Which format should I select in Photoshop to export an image? The final publication will be on the web.
Use the right tools for the job.
Photoshop is for raster images (JPG, PNG).
Illustrator is for vector images. When exported to SVG (scalable vector graphic), the code can be inserted into web pages using Dreamweaver or any other plain text / code editor. The real beauty of SVG for text, icons, charts, simple drawings, logos and even animations is that your artwork remains sharp & crisp when re-scaled. You can't do that with JPG or PNG without significant quality loss.
InDesign is a good choice for printed books. But it's my least favorite choice for creating web pages.