I am responding here since it actually does not seem to be a bug, just in case there is more discussion about it. I agree its confusing, but the button actually has a function that is working properly. The button decides if a soldier should overwatch fire at all. Overwatch off disables overwatch fire even if the soldier does have enough TU left, that is to prevent for example a soldier wielding a grenade thrower from accidently hurting him/herself or other soldiers with splash damage. So I