Ha!  Got it.  I needed to make a layer from the background before it would delete.  I could KISS you!!  THANK YOU THANK YOU THANK YOU!!!!!!!

I'm trying to make the background trans.

I've got the "marching ants" and the background now looks red...now what?

OK, I got to the last paragraph..lol. I've located the alpha channel that I dragged onto the image, but now how to I use it to delete the background?? Thanks in advance, and sorry if I sound REALLY dim!!

Anyone else considering breaking into the SL market can contact me at arielyn211@aol.com  My husband and I are successful SL business owners with a lot of expertise there, and I would welcome the opportunity to introduce anyone to the nuances and subtleties of the game.  There's money to be made there folks.  If you question this, check out SLEX and look for 3D content.  I am also looking for someone willing to sell me tree textures (trees on alpha) that I can use on our creations in SL.  No, the textures wouldn't be distributed as textures, but rather they would be applied to a "prim" (building block) that would appear in-world as an actual tree. 

SL gets a bad rap due to the pervs, cynics and general naysayers, not to mention the drama-thirsty media.  I met my hubby there, and together we have built a business that is truly profitable.  I think a few of you here (man, some of you are TALENTED!) could generate a nice income there.