There are two ways to make an alpha channel, and I am glad you mentioned it because I completely forgot about that.
The easy way is to select everything in image with ctrl+a and then pick up you magic select wand and hold down ctrl while you click on the white. You will need to do the same with the square in the middle of the gem background.
Then you go to your selection menu item and chose save to alpha channel.
Overwrite the existing alpha channel and you will be good.
Next comes the slightly more complicated part. You will need to replace lines in your EQUI_Animations
from <!-- Spell Gem's --> to <!-- Seperator --> with the following:
Code:
<!-- Spell Gem's -->
<Ui2DAnimation item = "A_SpellGemHolder">
<Frames>
<Texture>window_pieces02.tga</Texture>
<Location>
<X>208</X>
<Y>216</Y>
</Location>
<Size>
<CX>39</CX>
<CY>32</CY>
</Size>
</Frames>
</Ui2DAnimation>
<Ui2DAnimation item = "A_SpellGemHighlight">
<Frames>
<Texture>window_pieces02.tga</Texture>
<Location>
<X>0</X>
<Y>250</Y>
</Location>
<Size>
<CX>0</CX>
<CY>0</CY>
</Size>
</Frames>
</Ui2DAnimation>
<Ui2DAnimation item = "A_SpellGemBackground">
<Frames>
<Texture>window_pieces02.tga</Texture>
<Location>
<X>209</X>
<Y>177</Y>
</Location>
<Size>
<CX>39</CX>
<CY>32</CY>
</Size>
</Frames>
</Ui2DAnimation>
Sorry about not putting all this in already. As for making a partial transparancy, since this is only a full transparency mask you have just made with the selector. All you need is to play around with making masks in Paint Shop. Here is a hint when you are editing your mask. 0,0,0 is full transparency. 255,255,255 is full opacity. everything in between is a partial transparency.