The bug

When moving through a nether portal, the overlay texture displayed is stretched, resulting in it looking strange, as well as pixels that are rectangular rather than square.

Compare the spyglass overlay, whose pixels are always correctly square-shaped:

How to fix

Render the largest square of the overlay as is possible in the middle of the screen, then tile this texture horizontally (or vertically, if the window is taller than it is wide) to fill in the rest of the screen.

I've included a mockup resource pack ( portal-overlay-fix-demo-854x480-1.20.5pre2-v1.0.zip ) which fixes this for the standard 854x480 resolution. Here's a comparison:

Type	Teleporting	Loading
Current vanilla
Fixed version