If your panels 'Add content' overlay stops working, then check your 'jQuery Update' version. I recently updated a site to use jQuery version 1.8 using the 'jQuery update' module, and it seemed to break the Panels overlay.
When clicking on the cog it appears to load, and the lightbox style overlay appears but the content interface doesn't.
The solution is to revert to jQuery version 1.7 or below.
Avid Drupal site builder & user for +9 years.