Background Transparency Issue

I am using a bitmap image as a background on a vb.net 2005 form. The bitmap contains only a single color to block off areas I want to be transparent on my form (RED R=255, B=0, G=0, in this case). When I load the image as a background, and set the transparency key to RED, the red areas are not transparent, they are red. If I remove the background image, set the forms background color to red, the whole form becomes tranparent, as it should. The question is, does the transparency key not work when using a background image, or am I just missing something.

John

I can only get the TransparencyKey to work now on controls like textboxes and listboxes... (I thought I got this to work with a background image and panel as well at one point in time... now I'm wondering...)