alpha texture madness Blender 2.79

windows 8.1 x64

I have made an earth with a few textures.  Then I place a slightly larger sphere around the earth, and put clouds on it.
When I turn on the alpha channel of this larger cloud sphere, there are very bad artifacts in the 3d view.
1) the spot where the specular highlight should appear on the earth is completely erased
2) The area around the clouds is very blocky and bad, sometimes punching holes in the earth behind mesh under it.



I am attaching the .blend.



What is going on here?
It's known problem in blender. And BF working with it. Look how this will be look like in 2.8, in Eevee:



But now. You can switch render engene to Blender Game, and change Alpha Blend type to Alpha Anti-aliasing:

 

It looks better.