Thanks Funks,
Yeah, as of now I just saved the chest hair layer as a PNG then imported it as an image layer and attached it to the main torso bone. But the problem is the character has TWO torso bones.
So I separated the the hair into 2 more PNGs then attached one to the upper torso bone and the other to the bottom torso bone. But now there's a clear break in the hair's movement when the character bends.
Since I can't use the bind points with an image texture...
It looks like Selgin has points on his sample above, however I just can't seem to get his file to open in my copy of AS8. Even after the update.
I understand you can add bones to an image but I'm not sure if that would solve my problem, or make it more complicated while animating.
Again, thanks for all your guys input, I'm constantly learning.