There is a high level of server load for this as well, not only placing these fake characters but making them move and act like real human players so they are believed and then culling them (server would cull them not the client to be clear because how would the client know to cull them without a flag?) only right before they are visible while taking account of lag (ping), interp, packet loss etc..

I definitely could see someone games doing this as a one-off to just catch specific cheaters they are suspicious of to confirm they are cheating (Many 3rd party anti-cheats in counter strike and the 1st party valorant anti-cheat do manual bans based on replay reviews) but also since they already do fog of war someone with wall hack seeing an enemy player pop in for 1 frame before disappearing would make it not effective on a wide scale.