I don't know about "dissolving" but you can have the entity slowly vanish into thin air when it dies.
You could declare a new animation in the entities fpe file using a frame of the entity just standing up (could be just one frame), then have the game run this animation when that entity dies. That could be put into the destroy fpi file. Also, use the same scripting as the "fadecorpse.fpi" script to have it vanish.
It'd be a bit etchy I'm sure, since I'm willing to wager that you would like the entity to be vanishing in the last frame of animation that they were in.
It's just an idea, but if you decide to try it, let me know how it goes.
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