Is there a way to hide hovertool for muted datasets that have muted_alpha=0?

My personal rule of thumb is if what you want to plot is in a DataFrame or xarray use hvplot, if not use holoviews. Of course the rule is always overruled by what is easiest to implement. The output of hvplot is a holoviews plot so you can always use both if needed.

in your example you can also change the overlay.opts to the following and get the same effect:

overlay.opts(
    opts.Overlay(
        legend_opts={"click_policy": "hide"},
        width=800,
        height=800,
    ),
    opts.Scatter(
        tools=["hover"],
    ),
)