[SDK] Problems with alpha painting.[Solved]
1.What the heck is Source SKD?
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I dunno what could be causing this, it may have to do with what view mode you're in.
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About point one, it's Source SDK.

EDIT: also what texture are you using? Cause I might see if it doesn't work for me either and we can send a bug report to Steam.
In my experience 3d Textured mode will work and 3d Textured Shaded will not. Here is one of my maps using the "nature/blendrockdirt_tunnel03b" texture in the various views:
Left: 3d Textures Shaded Polyhgons. Right: 3d Textured Polygons.
http://i52.tinypic.com/zu5ngm.jpg
Here is the final result in Portal 2. (I kept painting a little for emphasis)
http://cloud.steampowered.com/ugc/594690325697150016/6E70B80D038D3772720BCFFFCDAA32A18153A28D/
Edit:
chickenmobile wrote:
EDIT: also what texture are you using? Cause I might see if it doesn't work for me either and we can send a bug report to Steam.
Would you mind testing the texture I used in the screenshots, chickenmobile? Thanks if ya do 
morrock wrote:
And Alpha painting has never worked in Hammer, but has ingame.
Ahm...I was under the impression alpha painting on displacements has always worked. It has for me at least.
Well, the Source SDK has never given me any problems with it, I can't remember if I've tried it in the Portal 2 Authoring Tools.
Omnicoder wrote:
You must be in 3D Textured (NOT 3D Textured Shaded.)
I changed 3D camera view to '3D Textured' and it worked, thanks !