With the exception of the new orientation type, this basically 'un-commits' the billboard/halo orientation fixes produced by Vitobalbio in order to make them behave like in other game engines such as Unity (as in, what most developers expect).

What you're basically doing is bringing back the (arguably broken) behavior that existed before then (like how one might've found that the alignment of their billboards were off a bit from the expected behavior).

It does? I just checked and it doesn't appear to change the normals back to the old, wrong behaviour. They still are as they should.

I haven't looked at the patch, but thinking on the functionality proposed there is something I don't understand.
halos and bilboards are supposed to "camera space" effects. That's why they not take the object axis into account.
@Mitchell Stokes (moguri) what do you think?

I'm not really sure what "correct" behavior is here. However, I do know things changed with halos that was not documented, which led to T40097. If anyone has information about which commit changed halos, please add to the bug report. As for this patch, I'll leave it to those more familiar with what should be "correct." I guess this is where the module "User Member" idea would be helpful? Maybe we should get some of those.

@Dalai Felinto (dfelinto) ,@Mitchell Stokes (moguri) : Using the z object axis is very interesting: in the case of smoke particle you will want to rotate the particle to make it more 'dynamic' and it will be impossible with a fixed z axis.

@Florian Schneider (drjaska): about static billboard can you add an option in UI ? it will be genious if you implemented also a axis option for billboard to use X aligned billboard...

About XY billboard you can be inspired by line 3622 to 3640 in my effect/particle patch : http://www.pasteall.org/54880/diff.
good luck :)