Decals can be a bit fussy very occasionally with transparency.
To make a decal image with transparency.
Create your image as a 24 bit colour image first. BMP is good.
You also need to have a separate image (black and white or in the case of a continous tone image greyscale) for to use as an alpha channel which carries the areas which need to be transparent as completely and absolutely black = so in rgb its 0,0,0. The area on that alpha channel that should not be transparent should be white = rgb 255,255,255
Then in a paint program that supports alpha channel on images open the base image create an alpha channel for it - then open the black and white image you created copy it and paste it into the alpha channel of the main image. Save as .dds with alpha channel for use in FPSC. Thats it.
Some tips if you have probs.
Signs and some other images of that kind I make up in a drawing package and export the artwork as .bmp one main image and one alpha channel image - the beauty of this is its easy to create a separate image for the alpha channel - it being often just a copy of the main image artwork with a black and white fill where necessary - easy. You can then add extra effects in your paint program if you wish.
If necessary check in your paint program that the black alpha colour is indeed absolutely black and if not - refill appropriately or even just adjust the contrast so the balck areas become as black as is possible - with straight black and white you can turn the constrast right up to ensure this.
Occasionally you may find that any options your paint prog allows for choices to save .dds with alpha channel as I indicated above will not work - this is very rare but oddly FPSC sometimes takes a dislike to a particular image transparency for some reason unknown to me - if that happens try and resort to .png format which embeds the transparency info to the image so you cant usually edit it if you reopen it as it dissapears to become part of the image. For that reason I avoid the format unless absolutely necessary.
I would never reccommend using .tga and let FPSC convert to .dds myself and have said many times that I dont trust FPSC to do anything correctly - if the user can do it first - ususally better.
Personally I create all images as .dds directly and have only had to resort to any other format perhaps 3 times out of many hundreds of texture images.
Hope that helps.
