[HELP] Displacement Maps

okay, i realize there a million tutorials for creating an animated displacement map,
but i can't get it to work, been trying for hours. i hoping someone can help me figure this out.

I have a JPG of a flag, i took it into PS created an ALPHA channel, saved as a PSD, took it into AE.

- applied Displacement map filter to the PSD of the flag.

- created a grey solid layer, applied fractal noise and used the Curtains, animation preset.

- went back to the PSD set the displacment map to the solid layer with the curtains animation.
- used luminence to displace the X and Y.

but i get nothing - the flag is not displaced at all by the solid layer.

what the heck am i doing wrong???
its driving me crazy.

thanks,
steve