First. I'm a bit texture stupid
I understand how UV works and alpha channels. past that i'm a bit duh. So If I make mistakes on my undestanding in my following comments please bear with me
"Or use vertex alphas instead like the terrain demo does. It limits it's usage to display different height, but that's just a limitation of the demo, not of the method."
I think I'll try this one. Looking at the terrain video. This effect looks similar. It also looks like it has 3 textures applied. so I assume it can handle more.
"The alpha channel is part of the texture. You can create a new texture out of the dirt texture and the alpha map with the usual Java2D image methods and create a new Texture-instance from that."
Well tiling the texture with alpha set to it would just alpha the tile. Which wouldn't really work.
"To render the base texture independantly, you'll need at least two passes, which means that you'll need two different Object3Ds using the same mesh but different u/v-coords and textures."
Sounds inefficient. :\
"You can set textures on a per polygon level using the PolygonManager or you can assign them for the whole object using setTexture()."
Sounds interesting, but it doesn't sound like it would blend to other textures. Though I suppose you can make a blended texture.
I'm going to certainly try the vertex alpha.
edit:
umm, can't find the source code example for the terrain demo.