EntityTexture has a 4th parameter, that defines on what layer the texture should be applied. I believe the TextureBlend command determines how textures should be mixed.
texture001 = LoadTexture("opacity.bmp", 4) ;or use ,2 for alpha texture002 = LoadTexture("color.bmp") EntityTexture mesh, texture001, 0, 0 EntityTexture mesh, texture002, 0, 1