Isn't stealth more about being able to move about unnoticed?
It is perfectly possible for someone who is skilled in the art to move through, for example, a village square and no be noticed by anyone (as no one one pays them any attention). This is partly due to appearance/clothing, partly demeanour and partly just how they move from one area of the square to another (it is a form of social engineering/study/understanding). For example, someone dressed appropriately moving quitetly and casually between stalls or groups of people, stopping to chat to a few here and there is not likely to be noticed (or recalled when asked if they say person x at a later date) unless someone is specifically looking out for them. Similarly, it is possible, but *MUCH* harder to do something similar in a nearly empty location as well.
Things like shadows and darkness make the task easier in some circumstances, especially if there are large areas of dark shadow to move in, but because shadows are created by light sources this can make shadows quite hard to use. Also hiding in shadows needs different clothing and skill than moving unnoticed, and is more focused on slow, steady and silent movement.
From an implementation point of view, there is a flag in the message associated with persisting an actor which can be set to invisible, resulting (I think) in the client not rendering the actor. This might be able to be set to a different value for each client, depending on their character's perceptiveness, and might be able to be toggled (at least with a removeObject followed by persistActor message pairing - not sure if that is the proper way to do it, but might be a start). This should basically result in the player that is 'sneaking' appearing and disappearing, at different times for different players, as the move through an area, rather than a translucent or darkened appearance.
For stealth as a whole, as the skill is really made up of a number different skills, moving silently, moving in darkened areas, moving around without standing out (in a lit or busy area), or moving whilst making sounds appropriate to the surroundings (not even animals move silently through a forest) maybe the skill needs to be separated into different parts so players can use the skill(s) they need to. Why force a player to train a hide in shadows skill, when they just want to move silently behind a low wall in daylight so the people on the other side don't hear them?