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Not updated since addition of alpha test - see this thread:

Overall transparency of a mesh is controlled by the 'opacity' setting in the .model file. See Model system

At the default of 100, the mesh is fully opaque, and the texture's alpha channel is ignored. Below 100 the mesh starts to become transparent, and the alpha channel can be used to increase transparency in specific areas.

Set opacity to 99 if you want the mesh to be opaque overall, but have transparent parts set by the alpha channel.

Alpha checks slow down rendering, so any part of a model using an alpha channel should be a separate mesh with its own texture.