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A few miscellaneous thoughts on this before I forget them:
1. I don't think the 50% alpha thing would be too difficult to
do. The only quasi-weird aspect of is that the terrain
textures would have to extend into adjacent vertices' space.
That is, we current render the terrain for vertex (x,y) in a
square region bounded by (x-0.5, y-0.5) and (x+0.5, y+0.5).
In order to make the 50% alpha work, we would need to
shrink the current square by some amount (say 0.1), then
add an additional band of twice that size around the
perimeter.
2. There are some types of terrain (e.g. water/land
boundary, sandtrap on a golf course, etc.) where this type of
blending is UNdesireable. Should we have a way to suppress
it?
3. It would be more natural looking if the alpha levels
gradually decreased rather than going from 100% -> 50% ->
0%. Not sure how easy this would be with our current
backend renderers.