I think this is worse with too low polygon-size-limits... The default of 8 is pretty little. I think also for sea/islands a better approach is to only consider resolution 24 and 23 to be detailed without much dropping / generalisation. And then drop more. So something like
--polygon-size-limits=24:8,23:10,22:12,21:14,20 or bigger 20 makes more sense as long as this does not empty the sea :-)
But yes of course, I am sure there are better ways to merge more than just higher polygon size limits. That one is the dumb aproach...
In general maybe there is a better data source than OSM for the overview map? Garmin is not using OSM data for their OSM based maps for the overview map. Likely they decided it is too much work to get OSM filtered down nicely. However I do not know which data would be compatible (to mkgmap and more importantly in licensing). Aside from specilised things - like ICN/NCN cycleroutes in a map for cyclists, the overview map should include:
Sea/Land (generalized)
Country borders
Very big cities (but relative to the population of that country) to at some point only major capitals.
Very big/long rivers (rivers moved to relations - but they are often lacking)
Maybe major railways
Major highways.
For resolution 17 and 16 maybe huge forests. but not much in terms of polygons...
I likely missed 2-3 things but no more. And those things will be hard again with OSM database. Would be nice to show the ice on the poles or maybe green for the worlds largest jungles/forests - but that is soo hard with OSM.
Likely with 3000-4000 hours manual work one could create a OSM derived basemap database and then all those filters and considerations would be much less important.
The full OSM dataset is just a burden for the overview map, I really appreciate that you spend so much effort and time to improve mkgmap to work around the limitations.