Does it overwrite the content of each comment before deleting it? Otherwise it's still publicly visible and would have less of an effect

It doesn't yet, but that's not how deleting on Reddit works. When you delete a comment it isn't still publicly visible.

Don’t know if this is still the case but back when Reddit was open source they would keep the comment in the database on deletion, but using the edit feature you could actually remove the content from the db.