In your screen shot the blue badge doesn't have any black around it so it isn't a transparent image.

OK, if it's not transparent, than why can I see behind it?
My point is, if the image does not have a transparent background, than it should no appear so in VSD.
Sorry, but showing a black bg for transparent and a transparent bg for nontransparent is just stupid.

Thanks for trying to help anyways.

Have you copied the badge from another page or location? I've had PNG images convert to JPGs when moving, copying and then saving. I don't recall it happening in this latest build of VSD, though.
I've got that same shape used as a link/button on a site, it's on every page overlapping 2 different colors.
It displays just fine.

OK, just tried it again on another site, worked just fine.
I'd put in a support ticket, since this should work very easily. (You could also try down-loading VSD again just in case – sometimes down-loads get a bit wonky when installing)

You could always use an html box and hand code an image then add the image to your site through the add files tool.

Eric, this should work, though. Just click to add the shape and done in a sec – no outside editing or coding required. There seems to be a glitch in Phoenix's program

I have not or do not remember ever seeing many images or jpg images with transparent backgrounds. Usually gif or png images have the transparent backgrounds.
Go to the files folder and look up the image being used and copy it and open it up in windows photo gallery or a graphics app and see if it actually is a transparent background image. I am thinking that you will find that it is the shape with a grey box background.

OK I see is mute point, you have changed it to a box with transparent or no background

The image that's being used is not a transparent image because there would be a black square surrounding it in the screen shot of the design window if it was.

I am using the "Add a Shape" button in VSD. when I draw the shape on the page it has a transparent background. It should up load with a transparent background or it is not a WYSIWYG interface because what I see is not what I get.

PNG or GIF files that DO have a transparent background should NOT have a black box in VSD, I don't understand why they do, and the image drawn using the shape button does not.

I didn't know you were using the shape tool. The way VSD works is that it takes a snap shot of your screen to render it properly when you use the built in shape tool. Create that same image with a photo editor or WIS and add it to your page from outside VSD using the image tool and you'll be good to go.