@Squiddster, would a mix of that and collision conditions "Object overlaps Ground & Object NOT overlaps Mask" work? Maybe something where you give the mask object a collision polygon such that the player only collides with it when they are near its center/one edge (and angle the mask so that it's always at the angle of the bullet that collided?).
Kind of hard to explain so I will create a small example file
Edit: Here's an example of basic destructible terrain, you can use image masking as Squiddster said to show the true background I think (maybe using the canvas object?): Sprite terrain erase/destructible terrain example
Double edit: R0J0's canvas plugin is a better way to do it, but until plugins are available on the arcade you can use this method above.Jayjay2012-12-19 16:58:28