I (almost) got what you asked for to work. I was able to change the "normal map transitions" for when just walking around to use a fade out/in instead of the pixelation effect. I also found how to invert the event script "load map without pixelation effect", but there's a problem with that, as I'll describe later.
Fair warning - there are a number of places where this patch needed to occur. I may have missed some. Obviously one would need to really play through the whole game to ensure there weren't event scripts messing something up.
First, find routines to do what we need
Original pixelation routines:
00:9021 - routine to perform pixelation keyhole-close
00:904B - routine to perform pixelation keyhole-open
Low level fade routines, but cannot just use them directly:
00:8BB3 - low level fade-to-black, but needs param in accumulator
00:8B92 - low level fade-from-black, but needs param in accumulator
Now luckily I found some existing assembly that happened to do what was needed, even though they aren't whole routines:
00:87EA - passes fastest fade speed parameter to fade-to-black routine
00:8834 - passes fastest fade speed parameter to fade-from-black routine
Normal Map Transitions
First up, the places where the pixelation routines are called for normal map transitions. Note: The close and open routines seem to be paired, so if you only change some of them, then glitches can occur.
Various closures, change each JSR from $9021 to $87EA:
World to dungeon:
00:9C12 20 21 90 JSR $9021
Dungeon to dungeon:
00:9A99 20 21 90 JSR $9021
Dungeon to world:
00:9AA8 20 21 90 JSR $9021
Using a Return Tile:
00:8197 20 21 90 JSR $9021
Various openings, change each JSR from $904B to $8834:
Opening on Overworld:
00:831B 20 4B 90 JSR $904B
Opening on Underground:
00:8328 20 4B 90 JSR $904B
Opening on Moon:
00:8335 20 4B 90 JSR $904B
Opening on Dungeon:
00:8348 20 4B 90 JSR $904B
With these changes, I was able to test walking around Baron, the town, buildings, and the overworld, and it just uses the fade transition.
Inverting the event scripts transitions (sort of)
I found where to invert this, but it's buggy. It will work okay for some transitions, but many event scripts will need to be modified to make it work, because they assume the state of the fade. Some are flickery, and some mess up and try to "toggle fade" when it isn't needed and end up re-fading permanently as a result. Also some of the visual FX are involved, leaving the fade wrong, etc.
So, I recommend leaving the "without pixelation" as-is, and simply modify each script to toggle the checkbox. Fixing all the errors otherwise seems prohibitive.
In any case, the places to modify to invert the behavior. Simply change the BEQ's to BNE's.
00:EDE5 F0 04 BEQ $04
...
00:EE1B F0 04 BEQ $04
Again, there could be some bits I missed. But it's a good start! Happy hacking.