Alright guys! Some actual noticable progress now!

* I managed to get pretty much all the files in UnrealEd 2.1 - I just have yet to port the engine code over to it so the rest works properly. It's quite teadious, so don't expect that to arrive in the following update just yet.

* Thanks to the awesome guys from UnrealSP.org, I was finally able to import a model in Jazz3!

Notice the edited tree model on the right.
I will need to look into this more in order to fix the transparency problem. It's weird because the textures are the same ones - so they shouldn't have the black edges.

Anyway, next big target - animated models. Haven't tried this yet, but will later though.
I can already enhance the game by a ton now, I can easily add more models for special effects and items like new dreamcells and weapons!

P.S. Sorry about the double post. :/

EDIT
Alright, I fixed the transparency problems! Turns out there's an awesome tool that allows adding different sorts of effects and properties for each one of the triangles (that includes transparency for textures that have transparent areas).
I fixed the collisions with the palm tree (Now the center of mass is where the trunk starts, so Jazz collides with it correctly... unless you try to jump on top of it). Also added a new tree that you can see in the above screenshot (Except with fixed textures), it's the same tree, but with leaves facing downward, making it look more like an actual tree!