Here is how I made transparent surface tiles for my Newcastle Airport base.
This is the tile, it has a coastline and a river, so a good choice for some transparency.
http://i89.photobucket.com/albums/k207/Notebook_04/09093008-44-26Deltaglider.jpg
This is another view of the tile
http://i89.photobucket.com/albums/k207/Notebook_04/09093009-21-04Deltaglider.jpg
This is the same shot, with the tile commented out in the .cfg file, to show the size and shape of the tile..
http://i89.photobucket.com/albums/k207/Notebook_04/09093009-21-42Deltaglider.jpg
This tile has a .dds file name "Earth_3_w0016_n0624.dds", and the entry in the .cfg file is
BEGIN_SURFTILELIST
3 -16 624 1
END_SURFTILELIST
These are Orbiter names, and hard (for me) to relate to the geography. So I made a grid based on the position of the base, and the level of the tile, then the position North/South_East/West.
Using Ar81's SurfaceTileCalculator (STC)
http://i89.photobucket.com/albums/k207/Notebook_04/STW.jpg
So, this tile is Two South, Four East, from the base tile at Level Three.
In my naming scheme this is "NewcastleVOR_L3_S2_E4"
This is the .jpg screen grab from Google Earth with corner co-ordinates taken from STC and marked in yellow. At this latitude the tiles are tall and narrow, so its rotated 90 degrees in Google Earth to get the maximum screen area. Its then rotated -90 in Paint.NET to get the original orienatation.
http://i89.photobucket.com/albums/k207/Notebook_04/NewcastleVOR_L3_S2_E4.jpg
In Paint.Net, this is trimmed to the yellow markers, resized, rotated -90 and saved as a .bmp to be suitablefor DxTex.
This is the .bmp
http://i89.photobucket.com/albums/k207/Notebook_04/NewcastleVOR_L3_S2_E4-2.jpg
(It says .jpg, but it went into Photobucket as a .bmp., honest)
DxTex needs the .bmp file to be powers of two, for this latitude, the aspect ratio looks to be about 2:1, so 512x1024 pixel was a suitable size. Needed to experiment with these numbers, so other latitudes will be
different.
DxTex can load this, and save it as a .dds file.
http://i89.photobucket.com/albums/k207/Notebook_04/DxTex.jpg
To convert this to a .dds file type 1.
Select the "Format" menu, then "Change Image Format" then "DXT1(1-bit alpha)
Save this as "Earth_3_w0016_n0624.dds". STC gives the .dds file name.
http://i89.photobucket.com/albums/k207/Notebook_04/dxtbmp6.jpg
Now compare this with the early shots
http://i89.photobucket.com/albums/k207/Notebook_04/09093010-17-14Deltaglider.jpg
The tile is back, but it has lost its transparency, finally getting to your question...
The bmp was converted to a type 1 .dds file, this has "binary" transparency, anything Black in the alpha map is transparent, anything White is opaque.
So, the alpha map in this .dds file is completely White, so there is no transparency. We have to make the alpha map Black in the areas you want transparent, that is the Sea, the river, and the docks.
I use DXTbmp to alter alpha maps.
Openeing the Earth_3_w0016_n0624.dds gives you this
http://i89.photobucket.com/albums/k207/Notebook_04/dxtbmp1.jpg
As you can see. the Alpha Channel (top right) is completely White.
What I normally do is select "Create Alpha Template" from the Alpha menu, this gives a starting point.
http://i89.photobucket.com/albums/k207/Notebook_04/dxtbmp2.jpg
Double click on the Alpha Channel image at the top right, and it will open in your paint program:
http://i89.photobucket.com/albums/k207/Notebook_04/dxtbmp3.jpg
Now the work starts, you have to make the land White, the river/Sea, Black. Using Fill Tool, and brushes,
and Fill Rectangle, you will get something like this:
http://i89.photobucket.com/albums/k207/Notebook_04/dxtbmp7.jpg
Save the Alpha map in the paint program and go back to Dxtbmp and select "Refresh after Edit in the Alpha Channel window.
You can use the Transparency Preview from the menu bar or the spyglass icon in the Alpha Channel window.
Save now as a DDS Texture, type DDS DXT1, overwriting the old file.
You should have something like this:
http://i89.photobucket.com/albums/k207/Notebook_04/09093011-12-52Deltaglider.jpg
Hope this helps, N.