I glad you agree with my points. I only disagreed with you in my last point because it sounded like you were applying figure defenses before step 5. If that had been the case then shadowcloak would have applied to all the figures being attacked.
The other big hangup, and the point I think Corbon and I are still disagreeing is that with my method it is possible for figures sharing a space to get hit/missed seperately, when it it one space being targeted. I have no problem with that, but the rational for why is very loose and burried deep in the grey area between realism and games mechanics. No one will dig it out, they'll just nudge it closer to one side or the other once the official answer comes down from above.