Here is how to do it:
Quoted from Jaap Wagenvoort's Track Editing for netKar PRO Comprehensive Guide, yet to be released. Thanks to Jaap for the excellent work and for allowing me to quote some valueable informations here. According with Jaap, the full guide still needs to be updated an will be released as soon as possible.
Transparency in netKar PRO works with alpha layers on textures. This requires .TGA, .DDS or .PNG texture files with alpha layers. After loading of the track in KOF2 edit, by default the transparency is not enabled.
• .TGA/.PNG textures
To enable transparency on TGA materials in KOF2 edit, press ‘wizards’ tab and then click ‘auto alpha’. It will process all alpha layers.
• .DDS textures
For .DDS textures the steps are a bit different. Select an object with a .DDS texture (with an alpha layer which has transparency of course) and then either enable the ‘alpha test’ checkbox or the ‘alpha blend’ checkbox on the ‘material’ tab and select ‘Transparent Texture’ from the dropdown list on the right. Then click apply and the alpha layer will be processed on the .DDS texture/material.
Normally, you want to use the ‘alpha test’ checkbox most often (in combination with a value which indicates how strong the alpha test should be), simply because alpha test is better than alpha blend in terms of performance. However, for shadows you have to use alpha blend, simply because alpha test doesn’t work very well for shadows.
Configuring alpha layer blending
You can define the intensity of the alpha blend or alpha test manually. Default is at 0. If you increase this value (to for example 130), the alpha layer will stricter and creates better results for fences. Just play around with this value. On most tracks 200 is good for trees and 130 is good for fences, but this depends on the track.