So if anyone else runs into this, I figured out what it was — or at least I figured out a work-around…
Basically in AppDelegate::applicationDidFinishLaunching() I need to do
The problem has nothing to do with CCTransitionCrossFade beyond the fact that the transition i was doing allowed me to notice subtle rendering artifacts. But these rendering artifacts were still there even without executing a cross fade. I think the issue has something to do with what is be discussed here:
I think there are still problems when using a fullscreen sprite as a background image on an iPad2 with the projection set to 3D.