The transparency is clearly working (see the PDF I uploaded above), the issue is just this fringing thing. My code is part of quite a big project and much of the sprite creation is dynamic so is not so easy to post a code snippet, however, this is essentially what I am doing...
l_i_title = LoadImage(l_filename)
l_s_title = CreateSprite ( l_i_title )
The sprites are all created from PNG's with a white background and white is set as the transparent colour and since sprites are created with transparency switched on by default then I can see that the transparency is working.