In short, materials use shader codes with the effect command. FX files are apparently plain text format (unformatted text). I don't know how shaders work or how they are written (they're not in the manual).

Code:

---

material quicktest
{
	ambient_red = 255; // full brightness
	ambient_green = 255;
	ambient_blue = 255;
	effect = "
		technique technique_name
		{
			pass p0
			{
				// insert shader code here
			}
			
			// pass p1 // for additional passes
		}

		// technique simpler // additional techniques for lower end cards
		" // end effect string
}

action my_action
{
	my.material = quicktest; // assigns the material for the shader
}

---

This is as far as I can go. The manual only gives the information I've given. It doesn't explain how to do any calculations, or what the other options are available. I wished it did though.

This thread, however, should be moved to the shaders forum....