THIS SOLUTION UNTESTED IN ALL ENVIRONMENTS!!!
After much searching for a solution to this and not finding one, I developed my own solution. The following solution works for me and my needs. I dont now know if it hinders operations in areas of the plugin that i havent tested, and it also may not be optimal in terms of speed and/or coding conventions, but it works for me.
open gd.thumbnail.inc.php and scroll to the bottom of the file
change the function fastimagecopyresampled to the following:
function fastimagecopyresampled (&$dst_image, $src_image, $dst_x, $dst_y, $src_x, $src_y, $dst_w, $dst_h, $src_w, $src_h, $quality = 5) {
$dst_img = imagecreatetruecolor($dst_w, $dst_h);
imagealphablending($dst_image, false);
imagesavealpha($dst_image,true);
$transparent = imagecolorallocatealpha($dst_image, 255, 255, 255, 127);
imagefilledrectangle($dst_image, 0, 0, $dst_w, $dst_h, $transparent);
imagecopyresampled($dst_image, $src_image, $dst_x, $dst_y, $src_x, $src_y, $dst_w, $dst_h, $src_w, $src_h);
return true;
}
Note: I had a problem with cached images and had to delete and then re-upload my images to eliminate the black background.
Hope this helps people who are stuck.