This is seen in the same way as alpha (the transparency, not the team color) overlaps in Glest. While Tilesets are perfect, the alpha in unit models will overlap, so that you'll see nothing but the alpha, and everything underneath for some reason is not rendered.
I believe this is also seen in the dwarfs, in a building with flames (not sure which building). The alpha in the flames overlap, meaning that if you wanted to have flames, the model would need to be shaped to the flame, not the alpha (although this wouldn't help your model).
It doesn't seem to have anything to do with animation. Animated or not, it still has the same effect. I would classify this as a bug, and in my opinion, GAE should attempt to patch it. Something about the how the tilesets are rendered fixes it, though there is also the fact that tilesets cannot be animated, so I wonder if this has anything to do with that?!?
The question of the post is solved, as we now know a way to have alpha in the team color, but now there is a new problem. Why does glest not render alpha correctly and what can we do about it? Perhaps someone with experience could take a quick look at the source to see if they could figure it out? Of course, all the programmers for GAE are pretty busy, and we're a little short on programmers[1]. I don't have enough experience with c++, and won't have time to learn with my current schedule, and it needs more time than I have to spare. Of course, by all means, keep seeing if anyone can find a solution to this problem (or an alternative will do)...
@john.d.h - I think this is because you only showed how objects can appear BEHIND the object. His problem is that they won't show in the actual model.
1 - I have an idea. Suppose we go to coding forums and ask if any one wants to give a hand. If you guys think its a good idea, I'll gladly go and try to announce the GAE project (most of these forums have a 'help wanted' as well as 'project announcement' boards). It could be a great way of getting both more players and new coders to give a hand. What say you?