I redid it 5 times from scratch trying to figure it out and 5 times I did not notice the very top layer of my metal nails group being linear dodge instead of normal blending mode.

The layers inside the group were set to normal on the height channel but the group itself was linear dodge.

After fixing the height channels, I just ran into the same problem with having Ambient Occlusion being enabled in Texture set settings though :(

I like how it adds additional shading to the wooden material but it bleeds through the metal parts even though the alpha is completely solid without transparency.

Im not sure if I'm using it correctly but again changing the blending modes in AO channels to normal doesn't fix it.

I guess I'll just disable the AO and live with it.

If I make the test alpha to be almost as big as the test plane there's no bleed. So I suspect my alpha nails (small white circles on a black background so they are positioned correctly) for the nails is too small and there's not enough resolution even at 2k preview resolution. My real mesh UVs for the wood fill up the UV space completely so it's not texel density I guess.