>or even outright wrong (see: transparency-layering effects on things like Sonic the Hedgehog)

If you're talking about the waterfalls, I'm not convinced blurring was necessary or intended. RGB support was rare in televisions in the USA, but it was common in PAL regions via a SCART cable, and the Mega Drive had native RGB output. Furthermore, the waterfalls are drawn as vertical lines, which I interpret as representing individual streams of water. If it was purely a pseudo-transparency effect it would make more sense to use a checkerboard pattern, e.g. as in the spotlight effect in Streets of Rage 2.