Hmmm, it appears the shader is trying to multi-testure the decals...
Try changing your decals to be 32-bit TGA rather than BMP's.
OR
Try setting the decals TRANSLUCENT flag on. "set(hole, TRANSLUCENT);"
You may need to set its alpha up to 100 too.
OR
You may need to do both TGA and TRANSLUCENT...
If this doesnt help, I would take this issue to the SHADERS forum...