[Kehrrie]

Through trial and error I’ve determined that:

1. Illustrator can open a Photoshop document that has layers;
2. Those layers that have transparency will carry through as is;

Therefore, for example, if I have a two layer document and layer 2 has transparent bits (or “alpha” if you will), then Illustrator will treat that layer as an object with the transparency that was created in Photoshop.

IMPORTANT –> The key is that you must have either a minimum of 2 layers and your object of interest must be on a layer other than the background layer, which will be solid, OR no background layer. I think. Give it a try.

I don’t think it’s feasible to try to create a freehand soft mask in Illustrator. It’s just not geared for it.

HTH :: kehrrie