You have to be a little sympathetic toward developers who were expecting literally 99.99% of the people buying their games to be using a composite or RF connection, which was basically the case with the Genesis and close to being the case with the SNES. Genesis composite is low-quality enough that dithered shadows (and everything else) actually undergo a melting effect and look truly transparent. I'll definitely take this over flickering.
But on the other hand, checkerboard-dither transparencies looks pretty bad in RGB. You can't really tell what the transparent object is supposed to be, nor can you really even see what's behind it. Like Joe, I'd rather just have solid black (or solid whatever) if real transparencies aren't possible. However, if that's not a choice, then in most other cases I'll take the flickering.
The biggest failure of a fake transparency I have ever seen is the giant skull in the Saturn port of Symphony of the Night. I can't find a good shot of it at the moment, but trust me, it really looks awful.