Alpha Z sorting isn't a blitz3d bug, as far as i'm aware. It's to do with the alpha pixels not having a place in the z-buffer, so they have no sense of depth and are all blended together.
Of course it is. Every 3D engine that dont sort all polygons according to camera distance prior to rendering them has this bug.
Maybe if blitz included manual z sorting routine, it would help.
Something Like "AlphaSort(camera)" would be perfect...
I even though of writing one myself (using those hacks to loop through every entity and using EntityOrder... but since I read that EntityOrder tends to make meshes render incorrectly, I gave up)
Not having this alpha sort, is probably one of the reasons B3D is so fast :P
There´s even a demo (on dx7sdk or dx8sdk, I dont remember) with some trees on a terrain that shows the alpha problem, and how sorting the trees according to their depth from the camera solves the problem.