Off the top of my head...
Animate your character object using bones...once you have the walking
motion you want, copy the character object and used Replace Object to load
in an skeletal structure...this skeleton will now follow the same walking
motion as the "skin" of you character, but should be inside of the skin.
Now, just apply a Planar Image mapped Clip Map to the original character
object (which is serving as the skin)...turn on World Coordinates and use
a simple black image with a small white square (or whatever shape you want
the x-ray area to be) painted onto it. You'll have to fiddle with the
size and position of this image...and watch out when LightWave tiles the
image all throughout your world.
Since this Clip Map image is stationary, it will not affect your
character's skin until he/she walks through the area being affected by
the clip map....this will make the skin disappear and reveal the skeletal
structure underneath.
Advantages to this technique:
* You have precise control over which objects will be affected by the
clip map, so if you wanted a "concealed" weapon to be seen (like in Total
Recall) when the character walks through the x-ray, just don't apply the
clip map to it.
* Body parts outside of the Clip Mapped area will not be x-rayed, so you
can have the character's head and shoulders still bobbing up and down
above the x-ray screen, if you wanted.
That's about all I can come up with at 3am...hope it makes sense!