I had the same problem, using com.nokia.mid.ui.DirectGraphics helped.
Image myImage = Image.createImage ("/blah.png"
Image mutableImage = Image.createImage (100, 100);
Graphics gfx = mutableImage.getGraphics ();
DirectGraphics dg = DirectUtils.getDirectGraphics(gfx);
dg.drawImage (myImage, 0, 0, Graphics.TOP | Graphics.LEFT,0);
...
//transparency is kept now, don't ask me why
DirectGraphics dg = DirectUtils.getDirectGraphics(g);
dg.drawImage (mutableImage, 0, 0, Graphics.TOP | Graphics.LEFT);
hth, Dan

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