Holy crap I really am having something of a breakthrough with this technique, I'm going to do a full write up tutorial on this thread just to detail the steps for anyone trying to look at this effect because it's ridiculous now even on how older engines people don't really seem to have looked at the topic so much. Probably because it's a pain in the arse to implement if you don't know anything about viewports, blend modes and how they work.
There are problems I'm running into with this effect though at the moment, there is currently some z fighting I think happening with the outlines. I think maybe Z Write off will fix that, I will test it, the resolution for the quad is too small so I'm going to have to do some more fiddling. I hadn't realised when you posted in your example @cybereality that when you meant make the cylinders white as in a solid white, I thought I needed to keep them transparent and use multiply mode on those as well. Is this the effect that's supposed to happen when you blend the two solid shapes in on the quad?
I remember people on the Unity forums describing the same sort of method and back then I had no idea how to really use it effectively and this time it was for a fog of war. I had no idea this was what they were on about but I did keep a note of. This will take some tweaking but I'm definitely going to do a proper written tutorial on this.