Here's the model (ZIP file) that demonstrates it. This fog is rather dense though but is great for water. For air, have the grids spaced 8 times further apart (instead of 128, have it more around 512 or 1024). For sufficient testing, use this code and set the skills 1 through 4 in WED to set the color and alpha. Setting the alpha to 1% seems to be the best.

Code:

---

material volume_fog
{
	ambient_red = 255;
	ambient_green = 255;
	ambient_blue = 255;
}

action gridfog
{
	my.material = volume_fog;
	my.passable = on;
	my.transparent = on;
	volume_fog.ambient_red = my.skill1;
	volume_fog.ambient_green = my.skill2;
	volume_fog.ambient_blue = my.skill3;
	my.alpha = my.skill4;
	wait(1); // registers the above
	my.dynamic = off; // doesn't need to be dynamic
}

---

This is only a small sample though. If make the cube 2048x2048x2048 instead, twice the size on each dimension, you only need 8 times as many polygons.