Edit: Would it be possible to define the hide_osd() function within a Lua script, so as to avoid making changes to the CHDK core files?
No, the actual <alt> display stuff is hard coded in C code. I was going to say you could change the colors to transparent but those are hard coded too
I think your case shows there is a good reason to be able to hide the alt display, so I think this should be added to the trunk in some form.
In the meantime, if you want to just make a build that never shows the <alt> text, this should be very easy. Undefining CAM_DISP_ALT_TEXT in your cameras platform_camera.h should do it, or you could comment out the line in core/gui.c gui_chdk_draw()