I've noticed that a lot of the developers here are being frustrated by the billboard intersection problem. While there are some possible shader-related fixes for this, I thought I would bring up a possibility that might be slightly easier with the current engine. The billboard collision problem is nothing new - all games prior to DX10 suffer from it. However, in FS2 it is blatently obvious because of the explosions that are used. They are so bright and so contrasted that the center of the explosion is BLATENTLY sliced off by the offending model that it is hitting. This may seem like an odd suggestion, but what if you made a one-sided explosion? Instead of being a giant ball of fire for a missile that you *know* is going to slam into a ship broadside, use an explosion that is entirely directional, then rotate it based on the heading of the missile upon impact. Therefore, if you had an explosion that looked roughly like this:

No matter what the missile hit, the explosion would always only come out in one direction, eliminating the blatent cutoff. This of course creates the issue of, what if your viewing a missile from head on? A one sided explosion looks pretty weird. You could check the missiles orientation in relation to the player and create a deadzone where a normal, spherical explosion is used, and then it would probably look pretty good. Alternatively, you could simply spawn two one sided explosions opposite of each other.
I have no idea how easy/hard this is or if its been tried and thrown away before, its just an idea I thought I'd throw out there. An alternative idea would be volumetric explosions - using many billboards oriented in different directions to reduce the amount of visible clipping. For example, you could spawn 3 billboards per explosion, one oriented to the X axis, one to the Y axis, and another to the Z axis. In theory, this would create a volumetric looking explosion that would probably cover up a vast majority of the clipping. You could also make the explosion oriented to the screen but made of 10 or so billboards seperated from each other with individual portions of the explosion to create the illusion that its volumetric, and thus make the clipping slightly less obvious. Again, i have no idea if you guys have tried this stuff already, just an idea.