I don't think it's necessarily a case of them being over rated (I'm not going to argue about attributes as I'm not in a position to judge players I don't see on a week in week out basis for a full 90 minutes) but more the difficulty in implementing all the different factors that affect how a team performs. Many pundits and fans have speculated that England's performances aren't just about their abilities, but also about tactical cohesion and the weight of expectations on their shoulders. These are things which are difficult to accurately model.
A good example of this is Shevchenko. He's a proven goalscorer in one of the most defensive leagues in the world, in the Champion's League and at international level. Yet he just hasn't done it in the Premiership because of various factors other than his proven ability. Yet in FM because his attributes are still assigned with reference to his past performances he is an excellent striker in the game.
Also McClaren might be a bit over rated too which has an effect. And if you are using an updated database with Capello in charge then that's just the icing on the cake for England in the FM world.
Then again it might be the patriotic English developers giving their home nation a boost