Direct3D provides the capability to fill texture palettes with alpha information. You can determine whether the current device supports this capability by calling the IDirectDraw7::GetCaps method and checking for the DDPCAPS_ALPHA palette capability flag in the dwPalCaps member of the associated DDCAPS structure.
Direct3D also allows texturing from alpha-capable palettized textures. To determine whether the target system supports this capability, check for the D3DPTEXTURECAPS_ALPHAPALETTE flag returned in the two D3DPRIMCAPS structures that are contained in the D3DDEVICEDESC7 structure passed in a call to the IDirect3DDevice7::GetCaps method.