all clouds are diffuse, yes there are levels of diffuseness, you get the same effect on outdoor pyrotechnics or in a large arena where the source of the smoke is a long way from the laser source. The people at the laser source will see the image as intended, the more off axis you get the more it looks just like laser beams going through fog.
The best and only analogy I can come up with is...think of rail road tracks, when standing in the center of them, they always appear to come to a point (at some distance individually determined by individual viewers) and maybe that is why it "appears" to work when you are at the laser source. You may not be seeing the "surface" of the cloud, but you are seeing where your vision allows you to see the "surface". Maybe not the best explanation but thats all I gots. (hopefully that makes sense because that is how I understand it)
I have projected in rain and snow and actually love the way that makes the beams sparkle.
Pat B
laserman532 on ebay
Been there, done that, got the t-shirt & selling it in a garage sale.