I also just found this:
Transparency
Entities can be made transparent by setting their transparent or flare flag, or by using TGA images with alpha channels for sprites or skins. A logical consequence of a transparent object is that you can see other objects behind it. This sounds trivial, but has some consequences for rendering. Transparent polygons do not write into the 3D card's Z buffer and thus do not hide other polygons or parts of the same object behind them .Therefore if you intersect transparent sprites, you can see sorting errors on the screen - and the same happens with intersecting or overlapping triangles of transparent models. This is normally hardly noticeable, but if you see it, be aware that this is not a bug - it's a consequence of the z buffer algorithm used by all today's 3D cards for depth sorting.
The easy solution is normally to split your transparent entity into several entities that are then individually depth sorted. Depending on the type of the game, setting the d3d_entsort variable at 2 can also solve sorting problems.
Can anyone shed soem light on this d3d_entsort variable and how to set it?