Waste oil blending is actually very common on larger diesel engines. I have worked with the Centinal system by Cummins and also a system on Caterpillars, although that name escapes me right now. Caterpillar allows up to a 5% blend for a one time use following an oil change. An onboard automated system allows for up to a 1% blend on a continuous basis.
You have to keep in mind however, that these systems were not intended to increase engine fuel lubricity or anything like that. The reason for waste oil blending is to extend oil change intervals (waste oil continuously metered out and fresh oil continuously metered in), and to solve the disposal issue. These are engines which hold 50 gallons of oil, so we're talking significant costs associated with oil changes and disposal.
For our compact tractors and farm tractors, there really is no need - or benefit, to waste oil blending. It probably won't hurt, but why bother. It never ceases to amaze me how guys spend 25,000 on a tractor then try to nickle and dime the oil changes. Or try to save a gallon of fuel on a compact tractor that burns like 5 gallons a day. Go figure!