I like Colchester a lot but am aware of its shortcomings, for instance the labyrinthian layout is evil for newcomers and the (over)use of fake rocks is getting absurd. The variety of mammals on display is second to very few in the UK, though the collection lacks a similarly strong variety for non-mammals.
Though not professionally qualified to give an opinion, I'm not aware of anything that compromises animal welfare.
Yes the zoo is run on a (very) commercial basis, but I don't see a problem in that -it's the world we live in. Also, I believe it's because of this fact that Colchester seems able to continually add new exhibits at a faster pace than a number of other places which have similar or significantly higher numbers of visitors.
In summary, I don't think it's particularly overrated amongst informed/balanced zoo enthusiasts (apart from maybe a handful of over-zealous locals, and every zoo has those) and like Zoo Giraffe says there are a few others that are more overrated.