What embarrasses me in the OPs description is that he says after stretching the overlapping notes no more overlap (post #5). Have I understood correctly? Meaning the clip gets longer, but note durations don't? I've never come to think of such a possibility.

Stretching audio the relative positions of the material remain unchanged, so this is nothing like stretching audio, but a totally different thing.

If I'm understanding the question correctly Max has the answer. Use Process-->Length.

You control what gets stretched either notes, start time, both or neither in the dialogue box. If that doesn't do what you want then I've misunderstood what you are trying to do.

HTH