Creating Material for a HUD - .VTF Problems

I was wondering how you guys create nice clean materials for HUDs. I always have trouble with transparency and the materials just coming out not how I wanted it.

Anyway, I was just wondering what are the optimum settings for such vtf & vmt files; I know that the beta will render them useless but I figured I should at least learn it to say I know something.

These are my current settings.

Normal Map
No MipMap
No Level of Detail
Eight Bit Alpha

vmt Settings:

vertexcolor 1
vertexalpha 1
translucent 1

Anyway, I was wondering why I am having problems with the alpha channel. I get white on the outskirts of my material.