This glowing halo around the character's head here is rendered on a separate layer to the main world, at a quarter of the resolution.
Currently it's being overlayed on top (at half opacity) but the plan is to use it to mask out walls that clip with the character sprites because of the perspective.
Since the main camera is at a very high angle, pointing 60 degrees down, character sprites have to be angled quite steeply in order to look right in perspective.
This is a trick that some 3d games use for nicer top-down rendering, but because of how i've got this set up, characters inevitably clip into terrain blocks and it looks terrible.
My solution in Riptide Manor v3 was a whole mess of a shader that pulled in up to 16 character locations as a bundle of four transformation matrices then did some other junk to turn it into a usable radius that allowed me to delete parts of the walls.
It was, quite frankly, obtuse and annoying, but the results were pretty good.
Hopefully this method will me much easier to handle and customize, while still preventing the core issue and sidestepping any awkward compromises with respect to how the characters are rendered in the game.