In Photoshop, make sure you have your channels pallet visable. (From the windows menu in the program). click on the channels tab. You should see 4 entries in the list. (RGB mode) each of these entries is a color channel ie. red, green, blue, and rgb. You can add an alpha channel using the pallet tools.
All you need to do is select the area you want tranparent from the original image, switch to the channels pallet and fill with solid black. Invert your selection, then fill with solid white (which will show up in the game.
If your still confused, drop me an e-mail, and I'll slap together a small tutorial with images so you can see how it works.
Back from the Wasteland.
