I usually don't post a video of something that is not working, but oh well - it's been a while, and I was finally able to put in some time. The ball (missle 3 to be precise) motion is done in the Immediate VBI. It's not working 100% just yet, but masking works, and the motion mostly works.

http://www.youtube.com/watch?v=44tRcZQdNh4

I might try swapping the "optimized" ball move code for the regular paddle move code, and see if it works any better. I am trying to save every cycle possible, but I guess I need it working before it works in the shortest time possible