your texture must:
1. have an alpha channel
2. be saved as 32-bit texture (not below, since alpha info will be lost)
then for the material you need:
1. Alpha Blend Mode
2. under W3D export option check the box "Shadows". then they'll cast shadows ingame, although you use alpha channel (which normally disables shadow casting)
i haveing problems as well... in gmax/renx i cant use the material editor to define properties [like the one that has level 1 editing and stuff like that] every time i click it never works...
well i wouldnt use any material...i would try to load the material editor thing...anyone know how i can do this.... [where it says like Level 1 and stuff...dont think it called material editor but maybe Create a Renegade Skin or something like that...i cant open both the Material Editer AND the Renegade Skin Editor....
