I love their songwriting, personally. It's not complex music, it's music written in sometimes formulaic but often not rock structures. Listen to Teargas, it doesn't follow that structure at all. Or The Future of Speech, that song has one of the most amazing bridges I have heard. My favorite song from that period is Sulfur off the Teargas ep (I believe). It has one of the absolute best endings for a song that I have ever heard.
But overall, Katatonia's best album is Discouraged Ones. It's their darkest and most plaintive album, possibly excepting some of the songs from Tonight's Decision. Katatonia are not a happy band, they are a band that could possibly inspire you to suicide as they are one of the bleakest bands around. Their earlier material wasn't all that awesome, until Brave Murder Day which was one of the 10 best metal albums ever (I do not consider Discouraged Ones and the rest to be metal). So no, they are not overrated at all, but I am hard to call them underrated as most reviews bestow huge amounts of praise on them.