Yeah, I think it would make more sense to use textured lightmaps instead of gouraud for speed reasons, but it takes a lot of VRAM.
And the Color RAM is super limited, so I don't know.
If I had more color RAM I would just pick gouraud on everything.
Maybe I will use a technique similar to John in the end, or maybe I'll just not care about the transition between gouraud/no gouraud...
Yes, texture with the light "painted" is the most cheap and nice solution. The cost is it need more space data in VDP1 VRAM in pattern, and color data in VDP1 or VDP2 area VRAM. And more, if you need 4 or more variant color grades for ratio CC function for fade over VDP2 foreground, more data. In this case direcly in VDP2 color VRAM.
For Gouraud with texture, distorted sprite, only you can use color of the VDP1 RAM. The Gouraud tables store in specify boundary in VDP1 VRAM. John for Sonic-R seem convert in the fly the color palettes to Color Bank for the pattern in far clipping to fade area. Maybe the transition area is for this reason... I think.
In other hand, this issue is a good reason to gain speed. Because in some Z value in far clipping, the game not draw Gouraud distorted sprite, more expensive that distorted flat quad.
For me the ideal situation is a system lighting with a base ambient color , with at 3 lights parallel lights sourced color to affect a 3D model in real time. Very nice effect, and pretty usual in PSX games. And in other hand totally possible in SS. For the scenery, pre calculated Gouraud table lighting in some point in the scenery, is are a nigh or point lighting in the design. This point are at the 3 Light parallel that can affect at 3D models, not all models, only a controlled quantity, for not recharged the CPU lighting calculate. In someway Burning Ranger, Loaded(Point Lights) and Lobotomy Slave(Point Lights) engine archive this type of final render in SS.
The problem of use Gouraud with your LOD scenery system is we can see the change in the geometry shading, but for me is a low cost, to have lighting shading 3D real time game, and with a good compromise with the final speed.
Only share with you, my ideas, not are that I want say that need it your project. Right now, I think is a wonderful gift for the lovers SS, and possible the most advanced homebrew realtime engine for the system.
Regards!