updates explicit x-merge-overrides handling to handle generic extensions

[amaskara-dd]

What does this PR do?

Additional Notes

Review checklist

Please check relevant items below:

• [ ] This PR includes all newly recorded cassettes for any modified tests.

• [ ] This PR does not rely on API client schema changes.

  • [ ] The CI should be fully passing.

• [ ] Or, this PR relies on API schema changes and this is a Draft PR to include tests for that new functionality.

  • Note: CI shouldn't be run on this Draft PR, as its expected to fail without the corresponding schema changes.