No news here, but these CleanCut comparison shots are a good example of an extreme case for color correction on translucency.
First, a 24-bit color mockup. I've done this by getting a screenshot taken with r_wateralpha 1, and applying it with 60% opacity over another screenshot taken with r_wateralpha 0.
http://www.quaketastic.com/files/screen_shots/correction_2_mockup.png
Now, an actual ingame color-corrected screenshot taken with r_wateralpha 0.6. It's not as smooth as Floyd-Steinberg dithering, but it's very close to ordered dithering, surpassing it in some other cases.
http://www.quaketastic.com/files/screen_shots/correction_3_translucent_on.png
And this is how the translucency was without color correction:
http://www.quaketastic.com/files/screen_shots/correction_4_translucent_off.png
The Quake palette is quite poor for translucency, because the game wasn't designed for it. But an interesting side effect of using such a limited palette is that it makes easier to measure the effectiveness of such graphical improvements. With a palette developed with alpha blending in mind, the results will be significantly better.