Right now, it's impossible to make an "invisible man" type skin. I'm not talking about a completely invisible character, since that's cheating. I'm talking about, like, making the head transparent, with glasses or whatnot. Invisible person wearing clothes.
So, here's my idea:
First, expand the skin template to include an "inward-facing" layer for skins. Right now, the faces of a player model are invisible from behind. For the "main" layer, this isn't noticeable since they all face outwards and the main layer cannot be made transparent. However, for the outer layer, which CAN be transparent, it is slightly noticeable. Basically, just superimposing each model face with a second one that faces inwards (and is therefore invisible from the outside), would fix that. By default, the interior texture could be the same as the exterior one. However, this would allow for players to create sleeves with a darker shade on the inside! (Rather than sleeves that are invisible on the inside)
Second: Allow for the main skin to be made transparent. Delete your entire head if you want! Because there'd be an interior layer, anything on the back of an invisible head could be seen from the front: i.e, if you want to make an invisible person wearing a wig.
And of course, since making an invisible skin could be considered cheating in multiplayer, there'd be a server option for "minimum visibility:" basically, take all four textures (main exterior / interior, and outer layer exterior/interior), superimpose them on each other, and check how many pixels are invisible. If it's less than a certain thresshold (customizable as a server option; 33% is probably enough), the transparent pixels on the main skin are replaced with RGBA (0,0,0,128) pixels.
In single-player mode, who cares, make your whole damn self invisible if you want! It's not like there are other players around to not see you!