The cross-functional development team (or at least a trusted representative) does the T-shirt sizing for the backlog items (see the beginning of my article for what I mean by a cross-functional team).
As for whether they are using “team time” or “ideal dev time”, it doesn’t really matter, so long as the approach is consistent. Personally I would suggest estimating items as if you had everyone you needed to complete that item focused on only that item.
“Team overhead” is naturally incorporated in the team’s delivery rate, i.e. it shows what the team can deliver from the backlog in a given timeframe, taking into account any other activities they do.