I would recommend you use .dds. The way it works is make the skin, then add a channel called Alpha1 (in photoshop you do this in the channels pallet, not sure but PSP) make sure it is all white. Then select any parts of the skin (in the RGB channel, if thts what its called, the main one NEWay), and (back in the Alpha channel) fill in the selection black. Save the new skin with "include alpha channels" or something to tht effect selected (I can't check what it is in photoshop, coz I'm on a public comp). If you are using DDS, make sure the "explicit alpha" option is selected (i think thts what its called, but I no its the third one down). The black bits of the alpha channel will appear invisible ingame IF you apply sertain settings to the mesh. To do this, select the mesh in RenX, and edit its texture. Under the middle tab (I forget its name) select "Alpha Blend" from the drop-down menu. One last thing, make sure you export using file>export, not "Export with [something something]" from the W3D options menu, as it will not export correctly.
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