First I recommend seting DetailmeshSize=7 or 8 in flightengine.ini, and then in terrain_data.ini set these:
[AlphaObjectTextureMaterial]
DepthBufferCheck=TRUE
DepthBufferWrite=FALSE
RenderedInOrder=FALSE
AlphaTestEnabled=TRUE
CullMode=NO_CULL
LightEnabled=TRUE
SpecularEnabled=FALSE
EmissiveEnabled=FALSE
FogEnabled=TRUE
AmbientColor=1.000000,1.000000,1.000000,1.000000
DiffuseColor=1.000000,1.000000,1.000000,1.000000
ZBufferOffset=2.000000
BlendOp=BLEND_SRC_ALPHA
NumTextureStages=1
TextureStage[01].TextureName=
TextureStage[01].MipMap=TRUE
TextureStage[01].FilterEnabled=TRUE
TextureStage[01].StageColorOp=TEXTURE_MODULATE_DIFFUSE
TextureStage[01].StageAlphaOp=TEXTURE_BLEND_TEXTURE_ALPHA <-- this is important, I guess never used before setting
Works best with correct sized trees (eg. GH2, Israel2 or default), another benefits is the subtle soft look of trees, slightly different than TW originals