I fixed the code for you. Please note: I'm not a shader programmer.

Code:

---

material mat_test
{
    effect = "
    
    matrix matWorldViewProj;
    matrix matWorld;
    
    texture entSkin1; // 
    texture entSkin2; //
    dword mtlSkill1;
    
    vector vecLight;
    
    vector vecViewDir;
    
    // default technique
    technique test
    {
        pass P0
        {
            VertexShaderConstant[0]=<matWorldViewProj>;
            VertexShaderConstant[4]=<matWorld>;
            VertexShaderConstant[10]= <vecLight>;
            VertexShaderConstant[15]= <vecViewDir>;
            						
            Texture[0] = <entSkin1>;
            Texture[1] = <entSkin2>;
            
            VertexShader = asm vs.1.1
            	
            dcl_position v0
            dcl_normal v3
            dcl_texcoord0 v7                             
            
            def c16, 0, 175, 175, 100
            def c20, 175, 0.011,0,0
            
            m4x4 oPos, v0,c0
            sub r0, v3, -c15   
            mul r0, r0, c16
            mul oD0, r0, c20.yyyy   			
        };
    }
    
    technique fallback
    {
        pass P0
        {
            // set texture stage states
            Texture[0] = <entSkin1>;
            ColorArg1[0] = Texture; // stage 0 = skin texture
            ColorOp[0] = Modulate2x;
            ColorArg2[0] = Diffuse; // modulate by lighting
        }
    }
    "; // end of the effect string
}

---