You can set the GDAL_MERGE process up with QGIS using the GUI and that might be a good way to start testing.
Also, test on two tiles that are next to each other first.
I reckon it's something to do with NODATA. Please post your command in your question so that we can see how you're achieving the merge.
Short answer: I suspect there is no such standard for TIFF or GeoTIFF overviews. There are multiple implementations, methods and formats to define overviews for GeoTIFFs.
GeoTIFF is based on the TIFF format (PDF specification for Revision 6.0, from 1992). The format has support for multi-page documents or subfiles, similar to a multi-page PDF.
A GeoTIFF file with 4 internal overviews is essentially a 5-page TIFF file, as viewed with identify:
$ identify -quiet file.tif
file.tif[0] TIFF 2027x2823 2027x2823+0+0 8-bit Grayscale DirectClass 188KB 0.000u 0:00.000
file.tif[1] TIFF 1014x1412 1014x1412+0+0 8-bit Grayscale DirectClass 188KB 0.000u 0:00.009
file.tif[2] TIFF 507x706 507x706+0+0 8-bit Grayscale DirectClass 188KB 0.000u 0:00.009
file.tif[3] TIFF 254x353 254x353+0+0 8-bit Grayscale DirectClass 188KB 0.000u 0:00.009
file.tif[4] TIFF 127x177 127x177+0+0 8-bit Grayscale DirectClass 188KB 0.000u 0:00.009
You can split these into separate TIFF files with (e.g.) convert file.tif file%d.tif
, or GIMP.
A GeoTIFF file with an external overview uses a sidecar file. There is no standard approach how external overview files are created or used. For example, sometimes you may see a so-called ".ovr" file, which is a multi-page TIFF document:
$ identify -quiet file.tif
file.tif TIFF 2027x2823 2027x2823+0+0 8-bit Grayscale DirectClass 132KB 0.000u 0:00.000
$ identify -quiet file.tif.ovr
file.tif.ovr[0] TIFF 1014x1412 1014x1412+0+0 8-bit Grayscale DirectClass 2.101MB 0.000u 0:00.000
file.tif.ovr[1] TIFF 507x706 507x706+0+0 8-bit Grayscale DirectClass 2.101MB 0.000u 0:00.000
file.tif.ovr[2] TIFF 254x353 254x353+0+0 8-bit Grayscale DirectClass 2.101MB 0.000u 0:00.000
file.tif.ovr[3] TIFF 127x177 127x177+0+0 8-bit Grayscale DirectClass 2.101MB 0.000u 0:00.009
Other external overviews may use a ".rdd" or ".aux" sidecar file, which is a HFA/Erdas Imagine image file format. This is probably the most esoteric of the overview formats, since it is not even a TIFF file.
Best Answer
I have worked with external and internal to the large extent . External pyramids are little bit slow then internal one's because the data has to be ready from the external file . GDAL has to read .ovr file.
Pros of external overview:-
Cons of external overview:-
Cons of internal overview:-
Pros of internal overview:-