Ok, I think I found the problem...
This is done in Paint Shop Pro 7.
When saving the PNG image; Save As. The Save As dialog comes up where you select where to save your image and what name to give it. Select the Portable Networks graphic (*.png) type.
Click the Options button below. In this dialog select non-interfaced. I don't know yet whether "Optimized" or "Nonoptimized" palette is preferred, but I selected Nonoptimized.
Then click the "Run Optimizer" button.
The key here is the Transparency tab. Click that and select "Alpha channel transparency" and below that "Areas that match this color" Move the mouse over to the image where you'll note the cursor becomes an eye-dropper. Click the area you want transparent and the box in the dialog should change to match. I set the tolerance to 15 'cause I saw that mentioned somewhere.
Clicking OK will return you to the Save As dialog where you can save the file which should have a correct Alpha Channel transparency.
Thanks for the help, I hope this helps someone else out there.