Okay, so I tried what Malice suggested:

effect = "technique { pass { CullMode = None; AlphaTestEnable = True; ZWriteEnable = true;} }";

Here's the result:



This results has a much more prevalent blue outline around the transparent areas then when I used the OVERLAY flag and putting CullMode = None; into the diffuse shader from the workshops.

I think this way looks worse. Am I just getting lucky with OVERLAY, because I'm not sure it is supposed to help in this case, but I was fiddling around?

Edit: actually after looking at them, I'm not sure which I like more.