HH is still in the cards, and is slowly becoming more and more useful.
The dithered and other methods will not give zero cpu hit transparencies. That is still pretty much a pipedream. My cunning plan will hopefully be fast, but I seriously doubt it will be compatible (eg. it'll only work with games that use mode 1 backgrounds, and will totally corrupt any games that attempt to subtract or add multiple background layers against the main screens background layers, and possibly further side effects).
Having accurate transparency would involve changing most of the graphics code across several files, and would seriously reduce speed. Thats not really an option.
The problem is that you can't just say "This part of the screen will be transparent, so draw it slightly differently" or "this background layer has x% transparency". You are just given two screens - a subscreen and a main screen, and both have 4 backgrounds. You then have to take the main screen and add or subtract the subscreen against it. Drawing the main screen saps enough enough processing power, never mind drawing the subscreen as well, and then finding out which pixels would actually make a noticable difference (otherwise you'd end up dithering the entire screen as soon as color addition/subtraction was enabled). So the current version of the code tries to guess which layers out of both screens should be drawn, and draws them on top of each other. This is still not simple however, as every pixel drawn has to be checked to see whether it needs to be drawn on top of the current surface or below it (ie, ignored), depending on it's priority.
However, if my cunning plan works, it will give the same looking effect (opaque line, transparent line) as your original suggestion, just done in a completely different way, and much less compatible. It would probably be best in the long run to allow a second, manual way to apply the "opaque line, transparent line" effect to individual layers as well as the automatic (guesswork) approach. This would at least allow you to play games such as Megaman7 past the water levels.
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EDIT: Hmmm, my idea actually seems to work
(In megaman7, at least). Speed drops from 30fps to 28fps when the hack is enabled. Not bad, but probably not good enough for DaveC