The other day I happened upon this old tutorial (circa XSI 3.01) from Rob Wuster about “creating an alpha channel with an extra B/W image”. Here’s a quick update to make it work with a more recent version of XSI (eg Softimage 7.5).
You need to plug the Mix 2 Colors into an image layer. To create the image layer, I added the texture by clicking Modify > Texture > Add > Image.
This will give you the same effect shown in the tutorial: