Even if it is pixelated (I'm not seeing it, but I'll take your word for it) it should still look fine in Glest since the camera is zoomed pretty far out. For alpha, if you're modifying your texture in GIMP, you can select the part you want to make into alpha, then click "colors" > "color to alpha", and then mess with the settings until you've got it the way you want, then apply it. There's a little preview window that should show you what you're working with. The part with the checkerboard pattern is the alpha. It might take a little practice to get it looking the way you want it to, but just experiment around with it and you should figure it out. After making the alpha, I generally use a bucket fill with opacity of .25 and a black color, so it makes the color less bright. That's just my preference, though.