OK.
IMHO 'Alpha shadows' feature means ability of a mesh to cast shadow according to alpha channel of its material.
WZ4 can't do that. There is an example to that effect in example.wz4 with the comment that wz4 does not do that (you can find it by searching an Alpha op).
So, in order to fake alpha shadows, you have to delete faces that represent material's alpha channel (of course it's a rough alternative, but may work in some cases).
In order to delete them, you have to first select them. That's where select by texture comes into play
So, you select faces by your alpha map, then delete them and pseudo alpha shadows should start to work (like they do in your example)!