Lot's of folks are asking why "We are talking over it" is not acceptable solution. I just want to point out that (1) "We are talking over it" and (2) "We are talking it over" mean two different things in American English. (1) means we are talking loud enough to be heard despite the sound of it, and (2) means we are discussing it. I think it's clear that the intended translation was synonymous with (2). However, I do not know any colloquial or idiomatic German translation for (1). Maybe it would be said the same way?
Could a native German speaker provide a translation for (1) and clear this matter up?
Prepare for a long explanation! "Da" as a word by itself does mean "there." But "da-" + preposition is a construction in German that is used to indicate that the preposition is acting on an implicit object, which is often another clause. To put it simply, "da-" really means something like the word "that" in English when it's combined with a preposition. So: "darueber" means "about that" and "dazu" means "to that" and so on. HOWEVER, sometimes the English language, which evolved largely from German, has analogous expressions, like "therefore" and "therewith." More often than not (with the exception of "therefore"), these expressions are archaic, and the use of preposition + "that" is more appropriate. That said, the BEST translation can sometimes depart from this explanation if it appears in an idiomatic expression or colloquialism. For example, "noch dazu" can mean something like "to boot," "at that," or "for good measure." Those sorts of idiomatic expressions can often times be inferred by reason ("noch dazu" for example can be roughly thought of as "yet to that [point]"), but more often than not, idiomatic expressions just need to be learned on a case by case basis.
Finally, I believe the construction of "da-" + preposition comes from a contraction of two words that evolved in the German language over some long period of time, but I'm not sure.