Whole genome sequencing of the model organisms has created increased demand for efficient tools to facilitate the genome annotation efforts. Accordingly, we report the further implementations and analyses stemming from our publicly available P{wHy} library for Drosophila melanogaster. A two-step regime-large scale transposon mutagenesis followed by hobo-induced nested deletions-allows mutation saturation and provides significant enhancements to existing genomic coverage. We previously showed that, for a given starting insert, deletion saturation is readily obtained over a 60-kb interval; here, we perform a breakdown analysis of efficiency to identify rate-limiting steps in the process. Transrecombination, the hobo-induced recombination between two P{wHy} half molecules, was shown to further expand the P{wHy} mutational range, pointing to a potent, iterative process of transrecombination-reconstitution-transrecombination for alternating between very large and very fine-grained deletions in a self-contained manner. A number of strains also showed partial or complete repression of P{wHy} markers, depending on chromosome location, whereby asymmetric marker silencing allowed continuous phenotypic detection, indicating that P{wHy}-based saturational mutagenesis should be useful for the study of heterochromatin/positional effects.