the alpha reject initialises a double sided feature of the material as most meshes that have alpha want to see the texture on the other side like a single sided plane for a leaf. This of course though has problems if there actually is another mesh on the flip side as it will try to shadow itself. i think this is what you are seeing. I feel we need an option for double sided in the material editor.
To help prove this, first save the material with alpha and then try and open the material file in a text editor and look for all instances of this line:
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cull_hardware none
use ctrl+f to find in a text editor and replace with this commented version.
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//cull_hardware none
Then save and reload the material by regenerating the material in the asset manager or reboot skyline.
If the mesh comes in correctly like when there is no alpha material applied, except there should be alpha for your walkways etc...
let us know how this turns out