The top half of the dialog is too dark, and the top rounded corners are not clipped properly.
'overflow: hidden' is a super heavy tool and I fear that this will break a lot of things. The dialogs patch is probably safe (but still kinda scary), but the panels one definitely breaks things.
Generally, whenever we have some kind of popup in a framed PanelLayout that is not inside an overlay, this will cause it to be cut off (or in best case, clipped with ClippableElement). While that should be rare (there is no reason not to set an overlay, and even widgets infused from PHP code have their popups put into the default overlay these days), it is something we supported in the past, and even our demo relies on it.
A better solution to this (but much more time-consuming to do it right) would be to set the same 'border-radius' for all the nested elements, or to only set 'background' on elements with 'border-radius', but not their descendants.
framed PanelLayout that is not inside an overlay
Other than the demo example (which should change with toolbar overlays), are we actually doing this anywhere? Forcing people to use an overlay when they want to break out of a panel might be a good thing as it may avoid unforeseen z-index clashes (such as we had with the flow toolbar).
I can't think of any example off the top of my head, but people have used OOUI in enough places that there probably is one somewhere.
I am not opposed to changing this, if you want, but it should probably be treated as a breaking change.