What's a Gary layer? I googled it, but no useful results.
The alpha layer (which is more than fity shades of gray) of an image controls the transparency. You can also use an image without an alpha layer and define a transparency for it in a .txi file, but then the whole image will be transparent.
What is more important than if you use an image with an alpha layer or with a .txi file is rendering order. If you have water falling down in front of a rock face, make sure the water gets rendered after the rock face. If you have more water infront of the other water, make sure it is rendered after that.
If you link your water to the animation node it will get rendered after the static parts of a tile, but if you have more than one transparent mesh linked to the animation node you should still make sure they get rendered in the right order.
Your waterfall looks nice, but it could use some rocks at the edges of the water at the top of the waterfall to hide where the water 'ends'.
Maybe chamfer the edge where the water starts falling so theres no 90 degrees angle there.