I believe that you may have a fundamental misunderstanding on how 3ds Max itself or Wall Worm works.
Yes, the materials are kept separate in the imported SMD. The representation of those materials in Max are not necessarily identical to how it is in Milkshape. You will need to learn Max techniques/terminology and not think of things in terms of Milkshape.
As for the "Layers" you mention, this is not the terminology that is correct in a 3ds Max context. In Max, there are two separate "separations" of the data. On one hand, there are Nodes (which in the SMD are defined as bones)--some of whom have vertices and some that don't. On the other hand, each node has an array of Material IDs that determine what material appears on each face of the node.
If the imported SMD has one bone with meshes, you'll get just one imported mesh.
If the SMD has multiple bones with associated meshes and you keep this options off (Single Mesh), then you'll get as many mesh objects as there are meshed bones in the SMD.
On each meshed object, you can get to each "layer", as you put it, by selecting the mesh, going to the Modify tab, change to either Polygon or Element sub-object mode and scroll to the Polygon:Material IDs rollout. From there you can select each "layer" as you'd call it. (There are other ways you can get to each set of material parts via modifiers... but I don't have time to explain them all).
I hope this helps you. The bottom line is that you need to learn 3ds Max itself to understand how to manipulate the imported models. Max and Milkshape are not the same programs and have very different ways of representing/manipulating the models.
Shawn OlsonDeveloper of
Wall Worm3ds Max 4/Gmax - 3ds Max 2027
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