It would be done when the lighting is baked in the engine. You could set up nodes in the editor that have a radius of influence and each pixel could decide on an averaged view direction based on those nodes.
Interesting I guess folks missed some of my questions over the weekend relating to the tech as well. Here was the original thread but it fell off the map. http://www.polycount.com/forum/showthread.php?t=89650 Also just quoted it below """"""" Hello everyone, I did not see a thread yet talking about the final resulting…