I don't think they're overrated at all. In the hands of a very well trained shooter, there is no pistol out there that can perform appreciably better, and many that can't perform as well. Having said that, it's not the weapon for everyone. The short, light single action trigger demands a higher degree of skill, but it rewards that skill by making fast, accurate shots easier to achieve than any other design does. This is why the 1911 dominates so many shooting sports, and why the most elite military and law enforcement shooters tend to choose it.
Just look at the weapon's strengths. I've already mentioned the trigger, but it's worth repeating, since it is probably the number one reason why this almost century old design is still so favored. Many other guns can match the 1911s reliability and practical accuracy, but not one has as good, let alone a better trigger. Then there's ergonomics, which are unsurpassed by any other handgun; the gun points quite naturally for most shooters, and the controls are all placed ideally for rapid, positive operation, even under stress. The safety, magazine release, and slide release can all be operated by the shooting hand with great ease, and the motor skills they demand are not fine ones (certainly no finer than operating the trigger is). Thirdly, there is accuracy, of which the 1911 has more than enough. Some examples are capable of match grade accuracy (and they don't always necessarily give up too much reliability to achieve this either, though some do), but even a stock, GI 1911, that rattles like a castanet when you shake it typically has enough accuracy to put its full magazine inside an eight inch-diameter circle at 25 yards, and that's easily accurate enough for a combat pistol. Finally, there is reliability. Many, many people will sneer at the 1911 as a "design that you must spend a LOT on cash to be semi-reliable" (which quote, in fact, comes from page one of this thread), and this is simply rubbish. It's true that there are many unreliable 1911s out there. And the thing they all have in common is that the design has been monkeyed with to varying degrees. A well made, mil-spec 1911 is still as reliable as anything you can lay your hands on.
Since the 1911 gets an undeservedly bad rap for it, this issue of reliability is worth saying a bit more about. Remember, in its initial trials, the gun fired 5000 rounds nonstop with no malfunctions of any kind. And in the government tests that ended with the selection of the Beretta 92 as the M9, four M1911A1s, selected at random from government arsenals, were tested alongside the competing DA 9mms as control pistols (as were four S&W Model 15s, used by the air force). The M1911s placed ahead of several of the actual contenders, despite the fact that two of the four did not survive the tests; one suffered a cracked frame at 8,000 rounds, and the other a cracked slide at 6,400 rounds -- but remember, all the contenders were brand new guns made of the most modern steel, with the most advanced heat treatment processes available, and the 1911s were made in 1945 or earlier (possibly much earlier), and had already had tens if not hundreds of thousands of rounds through them. And yet still, the 1911s (in spite of the cracked frame and slide problems) managed to fire 34,400 rounds (the two surviving examples, of course, managed the full 10,000 each with no major malfunctions). Malfunctions totalled 46, giving 748 rounds between failure. Compare this to the HK P9S, which fired 18,697 rounds, suffered 357 malfunctions, and had an average of 52 rounds between failure. The DA pistol from FN managed to fire a total of 33,600 rounds and 81 malfunctions, giving an average of 415 rounds between failure. And even the pistol that ultimately prevailed, the Beretta came of worse than the 1911s in some respects. The rate of malfunctions was much lower -- at only 14 -- for an average of 2000 rounds between failure, but... the four Berettas tested only managed to fire a total 28,000 rounds, and none of the four was able to complete the full 10,000.
So there you have it. The 1911 is so unreliable, that ragged out examples which had been been used and abused for decades, and probably rebuilt more than once, more than held their own with the most modern brand new DA guns of the 1980s.
Now having said all this, I'll concede that the 1911 is far from perfect. And its day is done as a general issue sidearm with the military, and most law enforcement agencies. It has some small parts that are prone to breakage. The SA trigger is seen as a liability by the military and most law enforcement agencies. And it was designed in an age when labor was cheap and technology was expensive, while today the reverse is true, so it requires more machining, and is thus more expensive to manufacture than most more modern designs.
But for all that, its strengths still vastly outweigh its weaknesses, which is why it still remains the first choice many elite shooters who get choose their own pistol, when every single other autoloader of its generation is now a museum piece. I'd say that makes the gun very far from overrated.