not only are there issues with the lack of support for alpha they also "flicker" on both my pc and laptop when looking at more vertical surfaces.
There are more serious problems. The shadowmap projections aren't being done correctly, and result in "floating" and self-shadowing, amongst other issues. The self-shadowing causes the flickers, but it's not the worst of the issue.
With the shader, I cut down the self-shadowing somewhat, but it still has to take the result from the shadowmap, so gross errors aren't avoidable.
I avoid taking screenshots where that's happening, but when you free the camera from OTA POV, it's obvious how borked they are. With the shader, it's better, basically, but not perfect.
I have a feeling that Kloot / jK have fixed the worst of it, to deal with Behirith's new code, but I haven't been able to pin down how to fix basic alpha transparency at the on/off level- I think it's just a missing texture reference and a line of ARB code, but I may well be wrong.
Can these effects be used to create crystal or ice maps that will actually look reflective?
No. That's going to require taking Behirith's modification of SM2, getting the resulting mesh's TBN matrix, and providing for a second texture and some GLSL that can render it in a new way, of which your idea is just one. It basically requires a new map format.
I can't do anything there, other than badger people and try to explain why it's well-worth the work. I suspect most of that's copy-pasta work, as MapConv already takes in multiple textures, the map format uses multiple textures, etc. But in the end it's really up to the engine programmers to see the possibilities inherent in having shader support as part of the map format. I can't even alter the current ARB shaders to do simplified versions, because all of the incoming variables are hard-coded and I can't play with the textures except in the crudest ways (i.e., I could make maps look really ugly, but I don't think people would appreciate it, heh).
However, it should be possible to make normalmaps that operate on ground splats... if there's a way to get the TBN matrix, which I don't think there is ATM (Kloot hasn't exposed that to Lua and arbitrary display lists, IIRC, it's just available through UnitRendering).
There might be a way to do it with some fakery, though, using a "unit" where it's really just a grid of quads and it uses the old zxswg stunt with moving verts. I'll look into that. That might allow for decals that can be quite large and look good- amongst other things, they wouldn't have to take up room on the !@*#*!*! textureAtlas.