Thank you! The partially transparent pixels was a late addition to the engine, but I think it makes a BIG difference for the quality of the scene, so it's definitely something I will focus on getting right as I continue to tweak and optimize and try different methods.
The engine is a fairly simple approach, no fancy algorithms like Radiance Cascades for now. The only acceleration being done is building a distance-field of the scene so that the ray-marching can be accelerated.
There are a bunch of different write-ups on this technique, but this one is fairly good: https://samuelbigos.github.io/posts/2dgi1-2d-global-illumination-in-godot.html
I'm hoping to do a more detailed devlog to get into the weeds about some of the subtle points, but that is the basic idea.