SuperTuxKart will export both IPO and skeletal animation which you set in Blender. However, objects with either type of animation must have their type set to Object, LOD Model (if you are using LOD), or LOD Standalone in the SuperTuxKart Object Properties panel.
You may also want to consider using the vegetation shader for an easier solution for waving vegetation. See Materials for more information.
To make your animation loop continuously, select the keyframes you want to loop in the Graph Editor, and go to Channel > Extrapolation Mode > Make Cyclic. (Shortcut: Shift-E)
Because it is a lot of work for the physics engine to calculate collisions between two moving objects, you must set the Shape property in the SuperTuxKart Object Properties panel for each decoration of type Object, LOD Instance, or LOD Standalone. This is the shape used for the physics engine, and will not be visible, but it should make sense. For example, a train should have a Box shape, but a ball should have the Sphere shape. The Cone shape is pointy-side up in the physics engine.
Another method might be to set the Interaction property of the animated object to Ghost, and create another non-animated object the same shape as your original, but set the "Interaction" property to Physics only. See Physics#Kart-Object Interaction
About Skeletal Animation
A few considerations need to be taken into account for skeletal animation, so that your objects export correctly:
- When preparing the mesh and armature make sure they both have a rotation of (0,0,0) to avoid problems (after the rigging is done, though, you can move the object around. Just make sure the "rest position" of both of them is non-rotated).
- If you need to fix an already rigged model, it's not too late. You can do the following: reset the rotation on the armature to (0,0,0), unparent the mesh from the armature (select Keep transformation), invoke Apply rotation on the mesh (shortcut: Ctrl-A), and reparent the mesh and armature. Then you can rotate the armature again.
- At this time, a mesh and its armature need to have their centers at the same point.