TextureFlag 2, alpha problems!

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Indeed.. For textures with an 8-bit alpha channel, any part of the poly with that texture might end up being partially transparent. Transpareny doesn't jive with the Z-buffer, so polygon ordering needs to be done. B3D will order these polys by their entitys' origins, so you can only get your Alpha leaves to be properly transparent if each of them is a separate entity with an origin near its middle.

There is another option...

Try using the "Masked" flag (4) instead of the "Alpha" flag (2). Masked is a binary alpha channel; Any part of the image that is true black won't be rendered, and anything else will be fully opaque. The texture will never need to have partial transparency, so while it may have some jaggies, it can use the Z-buffer just like a normal surface -- you con't have to do anything to get your polys in order.