Quick and Dirty so probably not the best that can be done.
This was only a 96dpi image and there was a lot of compression garbage such that the pixelization was larger than the hair strands. You'd have to "Cut out' the bad areas per Eggs method or bring the image into a photoediting programs and erase out some the transistion areas.
Hair2 is with KnockOut effect removed and saved as a bitmap.
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