sorry to come to the party so late, but the reason the paladin skin doesn't work is because its alpha channels have been destroyed. I don't know how to restore them either, you will have to grab a fresh paladin skin again and do a copy/paste or something.
edit: err lemme try it again in english. The skin actually consists of 2 copies of itself, one exists as a base image, the other "floats" on top of the base image. In the paladin skin that doesn't work, the "floating" skin is not present in the skin. One of the main reasons this usually happens is that the skin has been saved in a format other than tga at some point in the editing process. Either that, or the artist got careless and decided to merge all objects onto the base image.