I know this is probably the 1,389,497^th post you came across that has to do with texture issues. I assure you I did my share of search and tested various suggestions and tips to no avail -- and this can be perhaps my last attempt at resolving the issue before giving up.

• What I did - I created a custom mesh for Skyrim using the 'Creating an armor for Skyrim' tutorial on Nexus Wiki site. Everything works as intended.
• My problem - For the life of me, I just cannot seem to get the transparency on my mesh working.
• Step-by-step of how I created the texture:
  1. I opened the UV Map I created (within Blender) using Gimp.
  2. Added a layer with black background (with the UV map layer still under bottom).
  3. Added another layer on top of the black background layer for the actual texture (what is to be visible) parts.
  4. Merged all three layers before saving the file as DDS with DTX5 and 'Generate Minimaps' flag checked.
  5. Using the same DDS file, I proceeded to create the alpha map by selecting 'Colors' -> 'Color to alpha' in the Gimp menu.
  6. I set the alpha color to black (#000000).
  7. I selected the 'Wrap' flag and changed the value of 'Height source' to alpha. Also, tried various filters and scale value for the normal map. (I'd think these don't actually have anything to do with transparency, but I tried different settings anyway)
  8. Then I saved the file as '{Previous file name}_msn.dds' with the same settings (DTX5 & Generate minimaps).
  9. I did not forget to add the Alpha property in Nifskope, as laid out in the Nexus tutorial.

So, despite following through the tutorial step-by-step, I couldn't get the transparency working as intended. For anyone who has time and interest to take part in my agony, you can take a look at my texture files (jmp {dot} sh {slash} kLKlrax) to see if anything jumps out at you (I'd really appreciate it!). On a side note, I'd like to know if the Nexus tutorial is outdated and/or if the instruction for texture generation is still accurate.

Any tips, thoughts, or help will be much appreciated.

It sounds like you've confused the alpha transparency layer you need in the diffuse texture file with the alpha channel you need in the normal map file. These are two separate things.

I've looked at your texture files. Where exactly do you want the transparency? It doesn't look like it needs any as far as I can tell.

Also, not sure what tutorial on Nexus you're referring to? I don't see any that pertain to creating transparent textures in Gimp.