Overlay after-string with cursor

[otadmor .]

Hello,
I'm trying to extend ediff to show the pws aligned like bcompare and vim.
For this I am required to add "fake" lines (newlines) as the number of
missing lines on each side.
I managed to understand where to put the hook and how to calculate the
difference, but I have no clue of how to add the lines themselves.
I have thought of 2 options but they do not fit my needs.
1. Add real text to the buffer. This gives me correct cursor locations (it
is possible to put the cursor on a fake line) but it makes a mess when I
open this buffer on a different window than the comparison window. I can
see my padding, and I might save this newline paddings to the original file.
2. Setting after-string allows me to use the window property without see
these newlines on a different window. The problem is I cannot move my
cursor over the padding which is not convenient when comparing files.

Is it possible to add an overlay for one window without changing the
original buffer text and being able to put my cursor on it?

Thanks.