The issue was raised on Zulip. The issue is triggered in
declarations containing overlapping patterns and nested recursive
definitions occurring as the discriminant of `match`-expressions.
Recall that Lean 4 generates conditional equations for declarations
containing overlapping patterns.
To address the issue we had to "fold" `WellFounded.fix` applications
back as recursive applications of the functions being defined.
The new test exposes the issue.
