I have this gif of smoke but it shows pink all around it when I inport it.
http://www.mytempdir.com/663774
That's because AGS only turns one specific shade of the purple transparent, not all it's variations. The smoke fades to a purple background, not an already transparent one. So only the shade of purple you select when you import is filtered out, the rest is considered part of the sprite.
If it were possible to have the purple background as a seperate layer behind the sprite, or better yet paste/paint fading sprites on an already transparent background, and then import you wouldn't have that problem. But as you know...
Thanks for the help .