the only reason i want to try and do it this way rather than using an avi mat on the background, is that i thought just the figure would render faster than the 500 frame animation....Ive seen lots of posts about exporting to photoshop but thats a luxury i havent yet been able to afford......

I have successfully exported an image than in paint shop pro shows up with a transparent bg, but the moment i try to import it into any video editing proggy, it reverts to a grey bg........... hmmmmmmmmm

You can always get Gimp and a photoshop UI, Which is free and can do alot of the things that PS can. 

but i would assume that paint shop pro could export transparent BG. However you might have to click some option telling it to do so.