Strange, because the preview shows exactly the effect you want to achieve!

Some things you might want to experiment with:

-There are two ways to apply your alpha transparency. Directly connected to the Alpha node or to the Global transparency node with a variable transparency function.

-Texture maps (Color and Alpha) can be applied as "Texture map" (UV) or "Projected texture map"

Of course you might just have run into one of the bugs........;-)

Cheers!