how about using the camera.transparence trick in a special way. maybe using a second view also transparent which moves fast to randompositions in a certain radius and set to lower alpha.
i just saw something like that yesterday when playing around. i used then the brightflag and got a very fast but smooth overdraw blending. looks like some kind of gaussianblur. add brightflag.

here are two shots of what i am talking about:


i think there are only slight modifications to be done. and it should also get tested on regular models,but...
however, if we get those shaders to the whole level, it .... stop.., here we go... render to texture(flat but highpoly(better in/output) model set proper to fill the whole screen..), and a pixelshader which performs the gaussian blur, or whatever. if we get this idea done, we can kick da ass*

but maybe this does not work lets have a look... and maybe you just have to use something like the fur shader onto everything