Internal Transparency Problems

Hello All,
I am attempting to create a Minecraft Character head with the 1.8 layers enabled. The 1.8 layers are usually mostly transparent so I wish to be able to change the texture to whatever I want and the transparency to work properly. Unfortunately it casts a horrific black shadow onto the cube underneath not allowing me to do what I want. In the given file I have a node setup for how it would work in Cycles but the way it should work in Blender Internal is not working correctly. The aim is to be able to switch between Cycles and Internal depending on what type of animation I am trying to create, however I can only get the correct results in Cycles. If anyone could show me the correct setup that would be perfect

~example.blend (582 KB)

Bump ^ I really need help on this :s

Add some lighting to your scene
or make your material shadeless
or in the World / Gather settings reduce the Attenuation distance to near zero
or change the Gather from Raytrace to Approximate