The chain's texture has an alpha channel for the transparency... I tried to model it once but my poly count jumped sky high. currently it's a plane with a color, bump and transparency maps.
I haven't done anything special for the shadows... I can cause a problem though because even the zero-transparency areas block some of the light.
Benny
When in doubt, delete history and freeze transformations.
My latest snake game
(Requires DirectX9 SDK and Framework)