The Basics:
The desired transparent color needs to be index 255 in the color palette.
Prefix the texture name with a "{". Ex: {my_texture
Render Mode: Solid
FX amount: 255
Paint.Net Image Editor- http://www.getpaint.net/index.html
Wally Image Editor - http://www.slackiller.com/hlprograms.htm (all the way down)
Sledge Map Editor - http://sledge-editor.com/
