From what I've read Pixillion is only a file type converter and not a photo editor. Per the documentation, any transparency already set in a photo will be transferred to the converted format IF the new format supports transparency (many do not).
Microsoft Photo Editor (free in MS Office) had a very easy interface to make areas of a photo transparent. Unfortunately PHOTOED.EXE disappeared when I went with Office2003. It can be downloaded for free at http://www.megaiq.com/downloads/microphotoed.exe. It's really quick and simple.
The best course may be for you to do your conversion, then use PHOTOED.EXE to make the desired areas transparent. 3DGZ
