texturing/rendering problem

this is a quick texturing study, applying the texture-mapped-onto-a-plane idea which is often used for hair. The idea was a close up on a woven basket or hat with grass strands. I’m having a problem which I also noticed in a warcraft 3 cinematic, which is that the areas which are supposed to be completely transparent, aren’t.

http://barney.gonzaga.edu/~amoore1/test/alpha_map.jpg
This image is set to affect the Alpha, and the Specularity.

http://barney.gonzaga.edu/~amoore1/test/diffuse_map.jpg
This image is set to affect the Color, and the Normals.

http://barney.gonzaga.edu/~amoore1/test/render.jpg

http://barney.gonzaga.edu/~amoore1/test/problems.jpg
Here are the problems which I see.

Any comments, criticism, or advice is welcome.

try using a png or psd that already has an alpha channel, and set to ‘use alpha’