Half-Life did it by blending textures (w/ mips!) into the surfacecache. SiN did it by spamming sprites.
I suspect something similar to the particle system would have to be done to manage them? (i.e. finding closest wall to particle, applying texture on surface update, as well as seeking out similar decal near it to prevent overdraw)
Did FTEQW venture into decals like this? I forgot.