I think you are confused between alpha on a WorldVertexTransition
material, and alpha on a texture. They are similar things, but happen in
different places. Try following this guide with a WorldVertexTransition
material:
http://developer.valvesoftware.com/wiki/Displacement#Blended_displacement_materials_.28alpha_channel_painting.29

Adam Donovan wrote:
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[ Picked text/plain from multipart/alternative ]
yes i mean texture and its all set up correctly in hammer.  Ive tried using 
other valve textures too and changing the alpha values from 0 to 1.  I already 
tested about 20 differnt settings with the alpha values and I always get the 
same result regardless of the blend texture I use or the alpha values



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