In case anyone cares, I adjusted the lighting in the diffuse shader to better match the default lighting.

Result:



I think this is the better of the two, the difference is (and experts correct me if I'm wrong) the OVERLAY flag cuts off transparency completely while the other method allows gradients in transparency, so the outline effect is more prevalent. For my situation this looks better, but mileage may vary.

Edit: One last thing of note. The blue outline I was referring to earlier that seems to outline transparencies seems directly related to the background color (sky_color) even though I have a sky cube set up. Setting sky_color to a more desaturated color helped an incredible amount.