If the guys from pantacore use a squashfs which by design is read only, they most likely also use an OverlayFS to write to certain files.
/etc is heavily integrated within systemd so if systemd already touches/uses the file before the OverlayFS is mounted it can not be altered.
As systemd basically is “init” (/usr/sbin/init) which is the first thing that gets started by the kernel, you need to mount the overlay before init gets called.
In OpenVoiceOS i basically added a pre-init which mounts the overlayfs and then hands over the control to the systemd init.
See the WIP pre-init at below link;
I add the kernel cmdline parameter “init=/user/sbin/pre-init” to boot this pre-init which mount the overlayfs and then the normal init is started.
(Bare in mind the pre-init is still wip as i need to included the mirrored boot A/B logic to it for the update system later on)