IMO the best option is to use png 8 with alpha transparency (is supported in IE6 too)

Example and explanation in this thread:

http://www.dotnetnuke.com/Community/Forums/tabid/795/forumid/109/postid/303523/scope/posts/Default.aspx

>> is it possilbe to use png files instead of gif files in your solution.  According to your page, the file names have to be the same. 

Sure. You can use any image format you wish as long as you don't change the file name. Both the file name and content type sent by the server are hints for the browser...it relies on the header typically found in the first few bytes of most images to determine how to actually render the image. Therefore it is perfectly fine to rename a PNG image with a ".gif" extension. Alternately, you could modify the script to also change the file extension from .gif to .png which would be a cleaner solution.

>> Also, what is the performance impact?

It's a client-side solution and the performance impact is the time it takes the browser to execute the script and fetch+render the replacement images.

Nik

Nik, I got this to work fine in your test script, but can't get it to work in my skin. DNN 5.x (latest)  I even used absolute paths, but it doesn't do anything.  I've tried it in my skin index.aspx and index.html.  Where is this suppose to go to get it to work?