It overwrites almost all of the original tilesets and mos files with new ones.
It patches the .are files but before it does this, it checks to see if an .are file already exists in the override folder. If it does, it then patches that .are file in preference to copying in a new one from a .bif file on the grounds that anything in the override folder is possibly already patched by another mod and I don't want to overwrite it.
I can think of one situation where it could cause trouble and that is one of the very rare mods that patches a .wed file using weidu. If someone has patched one of the following .wed files in Baldur's Gate (ar0100, ar0100n, ar0200n, ar0300n, ar0600, ar0600n, ar0700n, ar0800, ar0800n, ar1100n, ar1200n, ar1300n) then installing Graphics Overhaul after that mod is going to trash that mod because I overwrite those .wed files. I'm not aware of any single mod that does this but if it creates a major problem then I'll have to look at patching wed files rather than copying them in.
So, for a new installation, absolute safety says install it after the official patches and before anything else - including those mods that say 'you must install me directly after the official patches'. In practice, it's highly unlikely to cause problems even if - as you have done - the mod is installed last.
-Y-
Edited by Yovaneth, 09 July 2013 - 09:25 AM.