Greenfield
Adventurer
That must have been a pretty short debate. Dust of disappearance works like greater invisibility, greater invisibility allows a saving throw. And, oh yeah, the rules for gaze attacks specifically state the invisible creatures can't use them. End of discussion, right?
So this is pretty much as "surprising" to me as a player saying "I swing my sword at it": It's a situation completely covered by the rules and the adjudication is obvious.
For actual creative thinking that isn't covered by the rules, I think the answer is similarly a no-brainer: You want to encourage that in pretty much every way possible.
First, while the Dust of Disappearance works like Greater Invisibility, it isn't Greater Invisibility. Look at the duration if you need proof of that. The spell is going to have a minimum of 7 rounds, while the dust lasts for 2 D6 rounds. People protected by the spell can be revealed by spells like See Invisible or True Seeing, while the dust specifically says that creatures under its affect can't be revealed by such magical means. So, while the dust works like (as in "similar but not identical to") the spell, it isn't the spell, and in fact is quite different from the spell. And, while the spell allows for a Will save, there is no Save called for under the dust's description.
As for the surprise part: When was the last time a player in your game tried this?