Thanks for the reply,
I just tried this and couldn't get it to work, perhaps I misunderstood. In a nut shell I used both the new and old method of cutting the background from a material, by using 'Use colour texture as transparency', and creating an alpha channel in the transparency section. I tried a few things, including inverting the alpha, but I couldn't get anywhere. Any ideas? If you remember, could you check the settings on the model you were successful with? I've done a bit of research and can't really find anything useful...