Why can't we have a Prim texture check box that would set that texture to cutout mode.
http://www.opengl.org/wiki/index.php/Alpha_Blending#Another_Good_Trick
In this mode the texture would be decompressed and then the alpha channel would be thresholded to 1.0 and 0.0
Pros:
1. It would fix the Z order bug on most applications.
2. Better alpha sorting would allow for less prim usage.
3. Texture based dithering would still allow for limited alpha blending.
Cons:
1. You can't check "cutout mode" and still use the Prim's Alpha setting.
2. Some almost invisible pixels would completely disappear at times. Probably not a visible change.
Edit to add.
The "Cutout texture" option would set the texture to be drawn in with the normal non-alpha textures and thus the Z order would function.