Hello,
Kentico CMS 7.0 introduced a different system of team development. Now check-in/check-out function and storing files to the file system are two different things.
Use check-in/check-out for objects option enables you to check out objects ONLY within the portal system (as you have probably figured out already).
For storing virtual objects in the file system, you can use the interface under Site Manager -> Administration -> System -> Virtual objects:
Check the objects you wish to store in FS (in your case Transformations) and click the
Apply changes button.
Now you can manage these object's files in any external editor. You will find these files in
~/CMSVirtualFiles folder.
For more information, see the
Team development topic in Developer's guide.
Hope this helps,
JanaP