I am thinking of using more .png images instead if .jpg however when the .png image is loaded in VSD it seems to show with a black background. I find this a little off putting. However all is fine when previewed.

Is this normal?

Andrew-
Yes the black background is normal and represents areas where the .png is transparent (Unless, of course your image actually has a black background, in which case it would still appear black) That is why when you view your work in preview everything looks fine. I use .pngs for all my images because VSD7 has an annoying habit of making copies of all the .jpgs and renaming the copies every time (I think) you save your work and leaving the old versions on your system too. And they grow, and grow, and grow until you have a folder full of mess. Either that or they breed at night.

Anyway the .pngs work great and will appear correctly when you publish your website.
-Mike

Many thanks Mike.

Appreciate your comments..

That's annoying, but it does spark a question: Do jpegs load faster than pngs, or is there not much of a difference so long as the png is formatted small enough?

not a lot of difference between the two - it depends on the file size.
I use a lot of png's because of the transparent background it offers.

If you don't need photo realistic quality then I would say go with a gif or a png for the smallest file size with the best quality.