I usually make a transparency from the hair's template. I usually have to experiment with it a bit, but I eventually get it so that the hair poking out is made invisible. Another thing I've done is render the image twice - one with the hat/cap and one without. Then I use PhotoPaint or PhotoShop to composite the two and do a little 'smugding' around the hat's band to make it look like the hair gets squished in under the cap band.