I believe this is the right area to post this type of issue.
[EDIT: Forgot where I was, Probably would belong better in the "Lite-C Programming", but Ive
seen cross-process programming like this (litec cross shader) survive before,
The moderator will move it if he feels it necessary]

But, more importantly, WAY COOL so far. Very well done. Only missing smoothmess as youve said,
and maybe the flakes coming off? Can you make them the color of the vertex/pixel they flaked off from.
I'd love to get my hands on that code even as it stands now. Is it c-lite or a plugin?

Suggestions: cant help with the vertex coding myself, I havent got there yet.
But, is it the vertex scaling that make the polys suddenly vanish as they 'flake' off?
If so, I would suggest you look into some method of fading the vertex color to match the
color of your flakes, WHILST changing the vertex's ALPHA if its possible to change vertex alpha.
That way, the colors will fade together, as well as fading to invisible.

Another possible option to look into, shaders. Never programmed or used them myself, so Im unclear
on their limitations and/or complexity. But what if...
Is it possible to have a shader that snaps a copy of the visibile models texture or vertexes JUST ONCE,
then over time turns each used pixel/vertex (or 5% of all used pixels etc) and turns it into a particle,
then turning that pixel/vertex off in the snapshot(so it knows when its completed).

If youve already thought of this, and are just looking for help discovering the mechanism to use,
I apologise for wasting your time.

Good luck all the same.