I don't think LIFO has to be overnight. There are some routes with limited service where a 4+ hour connection is inevitable.

One additional consideration when planning around the LIFO rule: I recently booked a complicated award to Hawaii and AA couldn't find or price it automatically because while I did request the first non-stop flight of the day, there was actually an earlier "direct" flight stopping in LAX and continuing with the same flight number. After a long wait on hold the pricing desk allowed me to use the nonstop flight.