This article describes the overlay performance of the Suss XRS200/3 synchrotron compatible x-ray steppers installed in the IBM Advanced Lithography Facility. The Suss XRS200/3 uses a video-based brightfield microscope alignment system. The overall performance of the stepper was described previously. This article will specifically focus on the test, optimization, and performance of the alignment system. In the Suss alignment system, the quality of optics and test methods of the optical assembly was a critically important factor in achieving the 110 nm overlay quoted previously. A detailed discussion is given on the selection and characterization of these alignment optics, along with the subsystem level tests used to ensure performance of the complete imaging assembly prior to and after installation on the main stepper body. The overlay test methodology and data obtained during the acceptance testing is also discussed in detail. The exposure testing was designed to measure a full range of performance of the stepper. Indeed, overlay ranged from 50 nm (mean plus three sigma) on the very best levels to in excess of 150 nm on the most difficult. Sensitivity of the alignment system to small film thickness changes was tested along with alignment precision as a function of alignment mark depth or signal contrast.