Image textures with alpha

[OlaHaldor]

I have a model where I'd like to place some decals on a surface. The decals are saved as PNG with alpha channel as well as the usual transparent layers.

When I add this texture to the given surface, it maps perfectly and I can see it aligns as I want according to the UV map - but it doesn't appear transparent in the areas that should be.

Either I'm doing something wrong, or this isn't supported, which I think is kind of weird as well.

What am I missing?

[atnreg]

I may be on wrong tracks but in LW only way to get alpha to work is to use TIFF, PNG alpha behaves weird. At least by my experience

[OlaHaldor]

OK, so I figured it out using the PNG. Haven't tried TIF yet, but if that's more straight forward I'll work with that tomorrow.
What I did wrong was trying to use the alpha in a material mixer prior to the point where the diffuse and glossy materials were mixed, thus the glossy material would get the PNG on top of it, while the diffuse did not.

I attached the diffuse with the decal LAST in the chain, with a material mixer to place the glossy+diffuse base material below the decal on top, and used the alpha of the decal on the amount input.