|Apple II Lode Runner - Neo Geo style|
At one point I'd given it up as impossible, but further investigation (and a peek at the MAME source) put me onto the right path and confirmed that my initial theories were indeed correct, and I am able to implement it the way I'd originally planned.
The whole question of whether or not it could be implemented revolves around the sprite scaling on the Neo Geo; more specifically, if it is indeed consistent for each tile within a sprite. For the most part it is, although you'll notice above that the game status text at the bottom of the screen is corrupt - this shouldn't be an issue as I will ultimately be moving that text onto different sprites and the issue should resolve itself.
EDIT: Closer inspection of the MAME driver reveals the answer to the corruption; but as I mentioned it won't be an issue as I need to move the bottom 2 lines to another sprite chain for other reasons.
What I have discovered, however, is that the admittedly rudimentary video library is rather unsuited to selectively manipulating large, chained sprites and I will have to revert to programming the hardware directly. Not a big deal, but perhaps a little disappointing. Having said that, there's not a whole of lot functionality to implement in the OSD layer, and it shouldn't be too long before I have a playable, if vanilla, implementation running on the Neo Geo!