In laymans terms, does the overrun error (bit1) simply mean that the RX1 port can't handle the data quick enough?
not really , it means that the rx buffer is full and that a new byte has been received and ready to be buffered ---- but the buffer has not been read yet.

if the rx stream is continuous and you have no flow control then the buffer overflow condition will occur every time you take time out to process the rx data.
the higher the data rate the less time you have to process the data.