different kind of transparencys

I got a few types of transparency to work now, but theres on important type of transparency im missing. When i use an png and its alpha channel, its like ogre only uses 1 bit alpha channel. The Edges are way too sharp.
It should look more like the polygon on the right:
http://img134.imageshack.us/img134/2166 ... enz3ic.jpg
The Polygon on the left has a material with the transparent png, the polygon on the right a material with an colour and an grey scale image. the colour and the gray scale images are both inside one pass, blended with the colour blend mode. The edge is now smooth, but the blend mode seems to be wrong. Its too saturated. I tried several blend modes, especially the alpha blend modes, but this was the best result.

Is there a way to use pngs without getting sharp edges?

I reviewed png alpha support and its working fine, using the alpha blend mode, it uses the alpha channel correctly

Do you have set the the "alpha value" to any value other than 0 (as it should be)?