"when the space key is pressed adjusting the alpha of object 2 will have no effect, instead adjust the alpha of object 1 and the instanced object will then follow suit"
Nooooooooooooooo! That means we have to use Clones if we want to fade little detail objects (rocks, bushes, trees) into the scene. PLEASE leave alpha mapping independent for each instanced object (just as position and rotation are).
How else are we supposed to elegantly add objects to the scene (just having them pop out of nowhere is not the answer!). Other than fog we have no other options, please dont take this one away!
All you need is zeal