I think the final result looks pretty cool:

This was done by cloning the targetted entity and adding it to my overlay. Also I (obviously) changed to wireframe drawing and changed the material. The material is what I call a mask: an opaque monochrome texture that I use with "scene_blend add". I modulate this texture with the desired colour since the colour of the HUD must be changeable at runtime.
Also, the UV map is animated with scroll_anim.
The mask is a simple noisy clouds texture.