Fog related translucency issues in TSE

I have just started using TSE and seem to have come across a bug.

I set up a material like so:

new Material(CastleMaterial)
{
   mapTo = "Castle_TXT_01.png";
   baseTex[0] = "Castle_TXT_01.png";
   translucent = true;
   translucentBlendOp = LerpAlpha;
};

I then place a TSStatic in-game that consists of 1 plane and uses the above material and this is how is shows up in-game without any scene-graph fog:


This is how the exact same TSStatic with the exact same material shows up when there is scene-graph fog:



Is there something I am missing? I have also tried using the DiffuseFog shader with my 'CastleMaterial' with no difference...