Clothes textures alpha

Hey

I recently tried to modify some textures by trying to make parts of them transparent. I loaded the texture in gimp and used the eraser tool to remove parts of the texture. However when I pack the textures back into the game (I'm pretty sure I do this correctly since other modified, opaque textures work fine) then they either:
1. Instead of parts that should be transparent, they're black
2. Don't load in the game at all (can't see the model and need to use mouse to exit the wardrobe).

I use DXT5 compression to save textures that should be transparent.

Is there some proper way to apply alpha to the textures, and if so what is it?
 
If I remember correctly, the clothes are 3d models and replace body parts, rather than sit on the body(if that makes sense).
So, when you make part of it transparent, you're making a hole in it that will show the nonexistent internals of the model.
What I think you need to do is replace the cloth texture with skin.
 
I see. Replacing the texture with skin is an idea, but it would look really bad on clothing that isn't a tight fit.

Thanks for the help
 
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