I don't think I've seen this discussed before and a search didn't turn up much. I'd like to know if anybody has any success in modifying the image resizing methods to accommodate PNG images that have transparency. It seems that in the process of resizing, it converts the image to a jpg and that gets rid of the transparency. Unfortunately, that results in a grey background, which looks quite ugly on some images that are meant to have transparency.

Any tips or suggestions please?

Which version of SS are you running. I remember it was an issue but works fine 2.4

I'm actually using 2.4.5

Only thing I can think of is your environment includes and older version of the GD library that doesn't support imagesavealpha(). The function used to keep transparency (its called in the silverstripe GD wrapper). I know I've had this problem on certain hosts when their "default" php build is missing some updated or usually included modules. Takes forever to debug those :)

The GD library came bundled with my server stack. It seems to be the latest version.
Running PHP 5.3.5 if that helps to know.

GD Support 	enabled
GD Version 	bundled (2.0.34 compatible)
FreeType Support 	enabled
FreeType Linkage 	with freetype
FreeType Version 	2.2.1
T1Lib Support 	enabled
GIF Read Support 	enabled
GIF Create Support 	enabled
JPEG Support 	enabled
libJPEG Version 	6b
PNG Support 	enabled
libPNG Version 	1.2.10
WBMP Support 	enabled
XPM Support 	enabled
XBM Support 	enabled 

Hmm should be working, I know its working on 2.4.2 which leads me to believe its something to do with your specific install. Try writing a specific function to resize a png and see if fails. Something like this
http://www.akemapa.com/2008/07/10/php-gd-resize-transparent-image-png-gif/

Also check your logs to see if there's any error. I know the GD library actually needs a lot of memory if you're resizing a lot large images.

Finally check to make sure there aren't any extra alpha channels or paths in your image I know that has cause weird errors in the past for me