I assert it is legal, despite contrary opinions from some of our most trusted members.
Two main points:
Generating warp charge (p66) - warp charges fully regenerate at the start of each Player turn; and
Witchfire (aka psychic shooting attacks) count as firing an assault weapon (p69).
These two points combine to strongly imply psychic shooting is allowed on overwatch. Why else would your psychic powers regenerate during the enemy turn??
The counter-argument, as I understand it, rests on the statement "Witchfire powers aer [sic] manifested during the Psyker's Shooting phase instead of firing a weapon"(p69). To me, this is not a hard rule limiting when psychic shooting can happen but only a statement of general truth. Refer to the opening page of The Shooting Phase (p12) where it uses similar language for ALL shooting. Despite these generalities, Overwatch is allowed as an exception to shooting in your shooting phase.
Therefore, win.
Discuss.
EDIT 9/11/2012 after new stupid FAQ:
I concede. The GW monkey must have hit the 'not allowed' area of their dartboard.
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