5. Open this extracted kit with the PicDecoder
6. Go to "output/input" in the Decoder, then "import/export full Image" -> "Import bmp" -> open your edited kit (you remember, 512x256, 8 BPP)
7. Once you have this kit in the decoder you need the small version, click on the arrow right to "0 (512x256x8 shared palette)" and then click on "1 (256x128x8 shared palette)"
8. Go to "Betis" -> "Get low-res from hi-res texture" -> "simple" -> "ok"
9. "Window" -> "View Transparency" -> "Invert"
10. Then save as, use the name the Decoder suggests you
I followed the guide perfectly, it doesn't mention anything about the palette. I just had a look at the program and I think I've figured it out. Do I invert it, then select the colours in the palette that I want transparent, and move the slider for those colours to 128?