DXT3 is the correct format. First one you selected does not have the alpha channel supported, therefore it will not show transparency.
As for testing it, you could set your account as an event winner and check in-game, or an easy xml edit:
1.) Unpack SFX.MRS
2.) Look for the 'effect_list.xml' file, open it in Notepad.
3.) Search for this string (ALT+F): "red_commander"
4.) You should find some lines such as this:
Code:
<AddEffectElu name="red_commander">
<AddBaseModel name="red_commander" filename="ef_vip_red.elu" />
<AddAnimation name="play" filename="ef_vip_red.elu.ani" motion_type="0" motion_loop_type="loop" />
</AddEffectElu>
What is 'red_commander'? It's the object you have as the red target in Assassination (the red orb in the middle of the characters body.)
5.) Replace the existing code with this:
Code:
<AddEffectElu name="red_commander">
<AddBaseModel name="event_ongame_jjang" filename="ef_event_ongame_jjang.elu" />
<AddAnimation name="play" filename="ef_event_ongame_jjang.elu.ani" motion_type="0" motion_loop_type="loop" />
</AddEffectElu>
6.) Save, exit Notepad, and compile. Replace your custom SFX with the original.
7.) Start game, login, ect. Make a gameroom with the game "Assassination". Make sure you're in the red team. You should be seeing a Jjang on your head instead of the default red orb.
I prefer the xml edit, mostly because jjangs obstruct the user's view most of the time.