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I can't get PNG transparency to work in PS7 or CS.
I'll open a png with transparency already in it, change it, then ctrl-s, and the transparency usually saves fine.
But if I try and make something from scratch it never saves with the transparency.
I've tried saving for web with the PNG-24 setting, and the checkered bg displays fine, but doesn't work in-game. I have one layer (Layer 0), and the checkered bg displays in the main PS window too, but it just doesn't work when saved.
I've tried creating an alpha channel, like with .TGA's, but nothing works.
Try taking your image and pasting it into a new, transparent image. I think your only Layer being Layer 0 might be the problem, I always have Layer 1 on anything I save.