The node setup is quite simple:
and the experimental image is : (only the red is opaque other part is transparent).
So why can't we texture images with alpha values? Is this a bug? I've tried JPEGs and it works fine but we can't texture objects with any image textures that have alpha.
Note, this is the problem with the 32-bit version of blender 2.78, I don't know about the 64-bit version since it didn't work on my PC.
Please see the comments below before downloading the blend. The problem would not be evident unless the file is unpacked.