My wife makes wooden lighthouses amonst other things, they have a pcb with 8 leds that mimicks a lighthouse light scanning.
I did that with a pic16f54, 8 channels of port b are sequenced as though its a non crossfade circuit, then the cathodes of the even leds go to one port a pin which performs a pwm function, this pin is inverted with a transistor which then drives the odd leds.
Net result I have good crossfade and a realistic lighthouse effect with 8 digital sequence channels and just one pwm channel.
Squeezing the most you can from a simple pic.
My prototype circuit working: