We show that miscible two-layer free-surface flows of varying viscosity down an inclined substrate are different in their stability characteristics from both immiscible two-layer flows, and flows with viscosity gradients spanning the entire flow. New instability modes arise when the critical layer of the viscosity transport equation overlaps the viscosity gradient. A lubricating configuration with a less viscous wall layer is identified to be the most stabilizing at moderate miscibility (moderate Peclet numbers). This also is in contrast with the immiscible case, where the lubrication configuration is always destabilizing. The co-existence that we find under certain circumstances, of several growing overlap modes, the usual surface mode, and a Tollmien-Schlichting mode, presents interesting new possibilities for nonlinear breakdown. © 2013 AIP Publishing LLC.