diff --git a/initramfs/scripts/netboot b/initramfs/scripts/netboot
index c561892..b2d827e 100755
--- a/initramfs/scripts/netboot
+++ b/initramfs/scripts/netboot
@@ -3,7 +3,8 @@
 
 export PATH=/usr/bin:/usr/sbin:/bin:/sbin
 MOUNTPOINT=/root
-TMPFS_MOUNT=/mnt
+SQUASHFS_MOUNT=/mnt/squashfs
+OVERLAY_TMPFS=/mnt/overlay
 
 # Hook functions for initramfs-tools boot script integration
 netboot_top()
@@ -125,51 +126,59 @@ mountroot() {
     if echo "${FILE_NAME}" | grep -q squashfs; then
         log_begin_msg "Setting up SquashFS with overlay"
 
-        # Mount read-only SquashFS
-        if ! mount -t squashfs "${FILE_PATH}" "${MOUNTPOINT}" -o ro; then
-            log_failure_msg "Failed to mount SquashFS at ${MOUNTPOINT}"
-            rm -f "${FILE_PATH}"
-            return ${rc}
-        fi
-        log_begin_msg "SquashFS mounted at ${MOUNTPOINT}"
-        log_end_msg
-
-        # Setup overlay if requested
+        # Setup overlay if requested - need separate mount points
         if [ -n "${OVERLAYROOT}" ]; then
-            log_begin_msg "Mounting ${OVERLAYROOT} for overlay"
+            # Create mount points
+            mkdir -p "${SQUASHFS_MOUNT}" "${OVERLAY_TMPFS}"
+
+            # Mount read-only SquashFS to separate location
+            if ! mount -t squashfs "${FILE_PATH}" "${SQUASHFS_MOUNT}" -o ro; then
+                log_failure_msg "Failed to mount SquashFS at ${SQUASHFS_MOUNT}"
+                rm -f "${FILE_PATH}"
+                return ${rc}
+            fi
+            log_begin_msg "SquashFS mounted at ${SQUASHFS_MOUNT}"
+            log_end_msg
+
+            log_begin_msg "Mounting tmpfs for overlay upper/work"
 
             # Create tmpfs for upper and work directories
-            if ! mount -o size=2G -t "${OVERLAYROOT}" tmpfs_overlay "${TMPFS_MOUNT}"; then
+            if ! mount -t tmpfs -o size=2G tmpfs_overlay "${OVERLAY_TMPFS}"; then
                 log_failure_msg "Failed to mount tmpfs for overlay"
-                umount "${MOUNTPOINT}"
+                umount "${SQUASHFS_MOUNT}"
                 rm -f "${FILE_PATH}"
                 return ${rc}
             fi
 
             # Create overlay structure
-            mkdir -p "${TMPFS_MOUNT}/upper" "${TMPFS_MOUNT}/work"
+            mkdir -p "${OVERLAY_TMPFS}/upper" "${OVERLAY_TMPFS}/work"
 
-            # Mount overlay combining read-only lower + writable upper
+            # Mount overlay combining read-only lower + writable upper onto /root
             if ! mount -t overlay \
-                    -o "lowerdir=${MOUNTPOINT},upperdir=${TMPFS_MOUNT}/upper,workdir=${TMPFS_MOUNT}/work" \
+                    -o "lowerdir=${SQUASHFS_MOUNT},upperdir=${OVERLAY_TMPFS}/upper,workdir=${OVERLAY_TMPFS}/work" \
                     overlay_root "${MOUNTPOINT}"; then
                 log_failure_msg "Failed to mount overlay filesystem"
-                umount "${TMPFS_MOUNT}"
-                umount "${MOUNTPOINT}"
+                umount "${OVERLAY_TMPFS}"
+                umount "${SQUASHFS_MOUNT}"
                 rm -f "${FILE_PATH}"
                 return ${rc}
             fi
 
             log_end_msg
-            log_begin_msg "Overlay mounted successfully"
+            log_begin_msg "Overlay mounted at ${MOUNTPOINT} (lower=${SQUASHFS_MOUNT})"
             log_end_msg
 
             # Clean up downloaded image as it's now mounted
             rm -f "${FILE_PATH}"
             rc=0
         else
-            # Direct SquashFS mount without overlay
-            log_begin_msg "Mounted SquashFS without overlay"
+            # Direct SquashFS mount without overlay - mount directly to /root
+            if ! mount -t squashfs "${FILE_PATH}" "${MOUNTPOINT}" -o ro; then
+                log_failure_msg "Failed to mount SquashFS at ${MOUNTPOINT}"
+                rm -f "${FILE_PATH}"
+                return ${rc}
+            fi
+            log_begin_msg "Mounted SquashFS without overlay at ${MOUNTPOINT}"
             log_end_msg
             rc=0
         fi