Material Editor Problem

[Mudbill]

It might just be the preview being messed up. This has happened to me many times. The file turns out fine, it just looks really strange in the thumbnail sometimes. I have one where the alpha channel illuminates a pale yellow version of the Finder icon (Mac) behind the actual texture. Otherwise it still works just fine.

I do recommend using .dds files instead though. Especially instead of .png files. You can export such files with Photoshop if you get the Nvidia plugin (Windows only).