Hi DingoDad, Lightspeed makes some good points and you might want to consider this.
It does sounds like the MS agent bug in Windows 7, anything that uses MS agent technology in Windows 7 can’t do transparent backgrounds as far as I know and unfortunately I don’t think there is a fix for it. Some have suggested using the MS agent files from Vista might fix it but for me it didn’t work.
If you don’t have windows 7 then it could be a graphics card driver problem, make sure you have the latest driver in.