Cooming 2013: "Yumiko in the haunted Mansion"

[LCD]

Not a bad idea after all. This would save a lot of memory, especialy if the graphics is compressed.

Yes - this method is pretty simple. On the plus side it doesn't mask out holes in the sprite. On the downside, if it can't be "filled" from the side, it will be imperfect.

You could do a whole fill routine, I suppose, to build a mask. Or mask all 0 bits anyway, and have the eyes see through?

This depends on the Sprites itself. Small solid sprites have usualy no holes.
Rotation 1xleft and 1x right, then OR the results, and you have a nice mask too .