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Is Daggerfall alpha channel like Quake 2 alpha channel ?
In Quake 2 and Dawn of Darkness, the alpha channel is :
RGB 159 91 83

Daggerfall generally uses index 0 for the transparent cutout parts of textures. This is usually shown as black, but it's the index that's important rather than the colour itself.

Daggerfall Unity uses 32-bit ARGB textures, so you can use the alpha channel iself in texture mods. Internally it converts the old indexed textures into 32-bit format at runtime for use by the Unity engine.

Thank you.