Try this material for your level blocks
Code:
//Apply this material to levelblocks
MATERIAL* mtl_pTexBlock = 
{
	effect = "
	////////////////////////////////////////////////////////
	// Projected texture (FFP) by Xd1Vo
	// Adapted for level blocks by bart_the_13th
	////////////////////////////////////////////////////////
	
	float4x4 matEffect3;
	
	texture mtlSkin1;
	texture entSkin1;
	texture entSkin2;
	texture StencilMap;//I was planning to modulate the flashlight to the stencilmap too, but my A7E version doesnt allow it :P
	
	technique proj_tex
	{
	
		pass p0
		{
			Texture[0] = <entSkin1>; // texture
			Texture[1] = <entSkin2>; // light map
			Texture[2] = <mtlSkin1>; // projected shadow/flashlight
			
			
			FogEnable=1;
			ColorArg1[0] = Texture;  
			ColorArg2[0] = Diffuse;
			ColorOp[0]   = Modulate;  //use selectArg1 if not using dynamic lights
			ResultArg[0] = Temp;      //Temp = texture + diffuse
	
			ColorArg1[1] = Texture;
			ColorArg2[1] = Current;
			ColorOp[1]   = Modulate2X;
			
			ColorArg1[2] = Texture;
			ColorArg2[2] = Current;
			ColorOp[2]   = Add;
			magfilter[2] = linear;
			minfilter[2] = linear;
			mipfilter[2] = linear;
			
			AddressU[2] = BORDER;
			AddressV[2] = BORDER;
			BorderColor[2] = 0x000001;  
			
			texcoordindex[2] = cameraspaceposition ; 
			TextureTransformFlags[2] = count3 |projected;
			TextureTransform[2] = <matEffect3>;
	
			ColorArg1[3] = temp;     // (shadow map + vertex lighting)
			ColorArg2[3] = Current;  // (color map + detail map)
			ColorOp[3]   = Modulate2X; // modulate (color map + detail map) with (shadow map + vertex lighting)
			magfilter[3] = linear;
			minfilter[3] = linear;
			mipfilter[3] = linear;
		}
		
	}
	";
}

/* Add these lines to main function

if(flashlite!=NULL)
{
	create_dxmat(mat_effect3,flashlite.x,flashlite.pan,focus,mtl_pTexBlock.skin3); //eagle
}
//////////////////////////////////////////////////////////////////////////////////////////////////////////
*/



This one is a modififed pTex from XD1V0.