I'd say 'avtal' is a bit more formal, like a written contract. If you break it you could perhaps be sued in court. 'Överenskommelse' is more like a gentlemen's agreement.
As Jan-Olav said, överrenskommelse is more like an informal agreement. The Swedish word for pact is pakt.
They can be used synonymously but just as avtal, pakt is also a bit more formal and not used in everyday situations.
Could someone please break 'överenskommelse' to its component parts and explain their meaning, please?
Does 'enskommel' mean anything at all?
The word comes from 'komma överens' = to agree, to get along, to come to terms. The ending 'else' is used for constructing nouns. Note that the preposition 'om' is used in this case: Har ni kommit överens om villkoren? (Have you agreed on the terms?)
No, because överens is an adjective. You could however say vi är överens. It has no English equivalent but överens means ’that agrees’ so in English you’d just say ’we agree’ but in Swedish vi är överens with an adjective.
There is an English equivalent: We are agreed on that, also, We 're in agreement on that.
I'm hoping I don't sound too picky or lazy but this is an ugly and far too long word; are there no alternatives?
"Avtal" is also accepted, the difference is explained already in the comments here.
Anyone learning Dutch? This word is quite similar to my native language: "överenskommelse" is "overeenkomst" in Dutch. Quite easy for me to remember :).