tested your code and looks alot better now that the edges are going up and down instead of straight across, and when combined with my smoothing it looks great.
Using it only once is probably a better idea for framerate, but I have no idea how to make it create an actuall texture and pass it back to the game's script so it can assign it as a skin.

EDIT: and something I have been wondering about since your first post related to shaders... Why is "if" considered dirty?