In classical judgement form of logic, of course, this is contradicted with the law of excluded middle; it must be A or "not A"; one or other. Having recourse to Hegelian Logic maybe can solve your problem.

the compassionate being recognizes that there is fundamentally NO empirical distinction — jancanc

No, he recognizes that there is no metaphysical distinction.

No, he recognizes that there is no metaphysical distinction. — Thorongil

Yes, which is the same to say that he recognizes there is fundamentally NO empirical distinction, that is:
the compassionate being recognizes he that all persons in the phenomenal world are expressions of the same UNITARY will qua thing-in-itself. Thus individuation- empirical distinction between persons- is recognized to be illusory.

Thus individuation- empirical distinction between persons- is recognized to be illusory. — jancanc

Illusory only in a metaphorical sense. Schopenhauer regards phenomena as empirically real, but not transcendentally real, a distinction borrowed from Kant. Their transcendental ideality doesn't make them any less empirically real.

So you think this understanding of "illusory" "saves" him from the inconsistency I outlined above?:

1.Compassion requires one to accept empirical distinction. (compassion presupposes there to be two beings involved)

2. Compassion requires one to reject empirical distinction. (we are all "one" in the unitary will)

Isn't this inconsistent; that is, these two conditions can't both possibly be true? — jancanc

A wise philosopher said "In order to understand the world, you need to be able to hold two contradictory ideas in your mind at the same time." Light is a wave/Light is a particle. Much of what we do is determined by factors outside our control/We are responsible for our actions. There is no greater illusion than fear/Crap, I'm late for work.

So you think this understanding of "illusory" "saves" him from the inconsistency I outlined above?: — jancanc

Yes, but I think you've already answered it yourself: "the compassionate being recognizes he that all persons in the phenomenal world are expressions of the same UNITARY will qua thing-in-itself." The only caveat here is that this doesn't mean phenomena are unreal, only that, in comparison with the will, their reality is derivative.

Another way of getting at my point is to say that, for Schopenhauer, there are degrees of reality. There are individual objects of experience, which are less real than the Platonic Ideas of which they are instantiations, which are themselves less real than the will of which they are the adequate objectivity, which is itself less real than the thing-in-itself as it is in itself, apart from appearing as will. So Schopenhauer's ontological schema is as follows, with increasing degrees of reality:

Empirical phenomena > Platonic Ideas > will as thing-in-itself > the thing-in-itself as it is in itself.

The only caveat here is that this doesn't mean phenomena are unreal, only that, in comparison with the will, their reality is derivative. — Thorongil

Yes, i know exactly what you mean. Even at one stage I think he says "empirical reality is perfectly real". It's just like the will is even more real. (you mention Platonic Ideas....for myself, he seems to be a bit confused about their ontological status at times)

I was thinking about this before, yet trying to put the argument into standard form is a tad tricky.
Thanks!

you mention Platonic Ideas....for myself, he seems to be a bit confused about their ontological status at times — jancanc

Yes, I agree. The ontological status of the Ideas is murky in his philosophy. My current inclination is to regard them as truer representatives of the thing-in-itself than the will. Schopenhauer himself, in some early manuscripts, held this view before changing his mind and positing the will as thing-in-itself.

Isn't this inconsistent; that is, these two conditions can't both possibly be true? — jancanc

No, we are making a distinction between individuals who have experiences (empirically derived) and the will, which is metaphysically derived. These are two different realms, but they can co-exist.