I have a .png image with a transparent background:
But it shows up ignoring the transparent background feature and fills in the background with the wrong color instead of just letting screen background color show through.
You can see in the pic above that the background color is different (slightly darker) where it should be transparent.
yep that just does not work
Transparency not supported. Images are imported, then converted to raster 565 16-bit color format before being committed to the project. From that point on, image is what it is. But your pic also seems that it was made with layering and not flat (hence the checkerboard issue). So your bottom layer is bleeding through in the conversion.