1. This is not only happen to allied fighters.
2. This is not far from realism. In fact I still find it too easy to keep track on planes above the ground. How do you think, a Split-S maneuvre could ever rescue any evading pilot, if it was well visible above ground? Thats what camouflage was made for.
You problem is, contrary, the unrealistic visibility of the 'dots'... so called. There is no fluid transition between the dot and the LoD system. A solution were to make more LoDs, but this is unlikely going to happen with the sheer mass of planes in game.
And last but not least... this is not a bug, just because its unhandy for you (and everyone else).
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