I came across this post a couple of days ago which provides the fix - 
http://bjorkoy.com/past/2007/4/8/the_easiest_way_to_png/
It uses a behaviour (.htc) file to work the magic.
It'll work on background images too. 

It's an ugly, ugly solution.  But we've been left with little choice :(

There's an A List Apart article from a few years back that provides a 
good overview of the problem - 
http://alistapart.com/stories/pngopacity/, but the techniques it 
advocates only work for img elements and are pretty well outdated now. 

HTH,
Rob


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