Red's move here is perfectly ok because RRS 17 does not apply and she never is inside the zone.  If RRS 17 applied then Red would be obligated to gybe when she reached the layline for the committee boat regardless of her position relative to the zone.  Additionally, as drawn, Green would not be overlapped with Red at the moment when Red enters the zone and Red does not have to give Green room at the mark.

 I agree, with a caveat. Let's stipulate that 17 doesn't apply and 16.1 appears satisfied as red sails past the layline.  As drawn, they are on opposite tacks at position  5. By position 6, they are on the same board, red has entered the zone and there is no overlap. From then on out, green remains clear astern. This diagram might confuse some. There is never any overlap once the boats gybe; there is no contact between boats and no impeding of green by red. The apparent "contact" is between red at position 9 and green at position 10. When green is at 10, red is almost finished and still clear ahead. Under that interpretation, red does not need to give room. That said, as green is not impeded and has room to finish, I don't see any complaint green could have.  The caveat is that, if green throws their main over while red is still outside the zone (say, position 5.5), the overlap is established. As drawn, it appears broken by position 6. However, presumption would then work against red. That is, the overlap is established outside the zone. If that is agreed upon, then red would have to argue that she broke the overlap before entering the zone, green might argue she didn't. Since there would be uncertainty, the presumption would be that the overlap established at the gybe was not broken before red entered the zone.
Again, it all seems moot, as green is not impeded from passing the mark. 

Anthony said, “The caveat is that, if green throws their main over while red is still outside the zone (say, position 5.5), the overlap is established.”

Red and Green are overlapped from #1 until [just before] #6, irrespective of the side their mains are on, as they are both > 90deg to the TW. 

True. Good point, Angelo. That makes the burden even heavier on red to prove that she broke the overlap before entering the zone. But, I think the major point is that, from the point where red enters the zone, it does stay clear of and not impede green's course or its ability to pass the mark. 

Green should claim Mark Room at position 3, as Red's boom tip enters the Zone, though truncated by the art software.
At that point Green could gybe and claim a direct course to the mark.  
Proving it, however, is an altogether different matter.

A boat is in the zone when any part of her hull is in the zone.

To the author... please clarify. At the position after position 5 when Red first enters the zone are the boats overlapped? 

No problems  :)
I just wanted to say (to Philip Hubbell) that the boom is not part of the hull, so the Red is not in the zone at pos. 3.

Question if Red comes up from behind: Shouldn't she be clear ahead of green before having rights to steer up windward? 
And second - May Red steer higher that so called "proper course" (being the outside finish mark)
Right now this turns out as forcing a carry-over, avoiding the zone ..... coming from behind ( rule 17 - limited rights...)

I have not looked it up and fully analysed it - but my gut-feel says there are 2 things wrong with the behaviour of Red.

Question if Red comes up from behind: Shouldn't she be clear ahead of green before having rights to steer up windward?  ( No those were old rules 17 - 2020 17 is clear)
And second - May Red steer higher that so called "proper course" (being the outside finish mark) 
Right now this turns out as forcing a carry-over, avoiding the zone ..... coming from behind ( rule 17 - limited rights...)

I have not looked it up and fully analysed it - but my gut-feel says there are 2 things wrong with the behaviour of Red.

Just checked it - RED is wrong when steering above her Proper Course and hence lifting Green like in the drawing !  RULE 17 - Boats on same course and overlapped.
17 ON THE SAME TACK; PROPER COURSE
If a boat clear astern becomes overlapped within two of her hull lengths to leeward of a boat on the same tack, she shall not sail above her proper course while they remain on the same tack and
overlapped within that distance, unless in doing so she promptly sails astern of the other boat. This rule does not apply if the overlap begins while the windward boat is required by rule 13 to keep clear.
Proper Course A course a boat would sail to finish as soon as possible in the absence of the other boats referred to in the rule using the term. A boat has no proper course before her starting signal.

You would be correct if the overlap was established from clear astern. But, the author stipulates that it is not. See the note that at position 1, rule 17 is "off." ...that is, the overlap was not from clear astern. So...there is no obligation for red to steer proper course.

To Bruce Hebbert

To the author... please clarify. At the position after position 5 when Red first enters the zone are the boats overlapped? 

Being new to this, it appears that Red is not sailing a proper course (probably should call it a slow course) from 2 on.  While tactically interesting red could gybe much earlier and  be in the three boat length zone clear ahead of green and cross the finish line ahead of green.  This reminds me of "sailing to the moon", the fact they have to point to make the mark just seems wrong. 

Robert - In the absence of other situational information this does seem like a silly thing to do, i.e. just because you can doesn't mean you should.  In team and match racing this kind of thing is often done.  In team racing this may allow a Red teammate who was behind Green to finish in before both of these boats and turn a loss into a win (yes, I know team races almost always have upwind finishes :-) but from a tactical/rules point of view it is the same).   In match and fleet racing Red may want to make sure that Green cannot get on her wind and overtake her.  This would be especially true in lighter wind.  In fleet racing it would depend on whether there are other boats who can pass this pair.  It is possible that Red wants other boats to pass them if Red can win the series if Green's finish position is Xth place or worse and there are boats poised to pass them.  In match racing Red may be carrying a penalty that can be taken with this move especially if Red carried on even further.

This is a perfect example of having more options at your disposal by knowing the rules.

John Christman has it exactly right in my opinion.  It is possible that there was an overlap at position 6 (sighting from the bow of green) but it isn't relevant in this case because red was able to stay clear of green from 7 to the finish.