diff -ur gm.old/coders/gif.c gm.new/coders/gif.c
--- gm.old/coders/gif.c	2009-12-16 10:50:03.000000000 -0800
+++ gm.new/coders/gif.c	2010-04-19 08:07:34.000000000 -0700
@@ -1022,6 +1022,8 @@
           image->colormap[i].red=ScaleCharToQuantum(*p++);
           image->colormap[i].green=ScaleCharToQuantum(*p++);
           image->colormap[i].blue=ScaleCharToQuantum(*p++);
+          if (i == opacity)
+              image->colormap[i].opacity=(Quantum) TransparentOpacity;
         }
         image->background_color=
           image->colormap[Min(background,image->colors-1)];
@@ -1048,6 +1050,8 @@
           image->colormap[i].red=ScaleCharToQuantum(*p++);
           image->colormap[i].green=ScaleCharToQuantum(*p++);
           image->colormap[i].blue=ScaleCharToQuantum(*p++);
+          if (i == opacity)
+            image->colormap[i].opacity=(Quantum) TransparentOpacity;
         }
         MagickFreeMemory(colormap);
       }
diff -ur gm.old/magick/image.c gm.new/magick/image.c
--- gm.old/magick/image.c	2010-03-02 13:46:44.000000000 -0800
+++ gm.new/magick/image.c	2010-04-19 08:20:33.000000000 -0700
@@ -1925,7 +1925,57 @@
   image->is_monochrome=IsMonochrome(image->background_color);
   return status;
 }
-
+
+/*
+%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%
+%                                                                             %
+%                                                                             %
+%   S e t I m a g e C o l o r                                                 %
+%                                                                             %
+%                                                                             %
+%                                                                             %
+%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%
+%
+%  SetImageColor() sets the red, green, blue and opacity components of each pixel to
+%  a specified level.
+%
+%  The format of the SetImageColor method is:
+%
+%      void SetImageColor(Image *image,const PixelPacket pixel)
+%
+%  A description of each parameter follows:
+%
+%    o image: The image.
+%
+%    o pixel: Set each pixel in the image to this pixel's color and transparency.
+%
+%
+*/
+MagickExport MagickPassFail SetImageColor(Image *image, const PixelPacket pixel)
+{
+  MagickPassFail
+    status;
+
+  assert(image != (Image *) NULL);
+  assert(image->signature == MagickSignature);
+  status=MagickPass;
+
+  image->matte=True;
+  image->colorspace=RGBColorspace;
+  image->storage_class=DirectClass;
+
+  status=PixelIterateMonoModify(SetImageColorCallBack,NULL,
+                                SetImageColorText,
+                                NULL,&pixel,0,0,
+                                image->columns,image->rows,
+                                image,&image->exception);
+
+  image->is_grayscale=IsGray(image->background_color);
+  image->is_monochrome=IsMonochrome(image->background_color);
+  return status;
+}
+
+
 /*
 %%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%
 %                                                                             %
diff -ur gm.old/magick/image.h gm.new/magick/image.h
--- gm.old/magick/image.h	2010-03-01 13:15:28.000000000 -0800
+++ gm.new/magick/image.h	2010-04-19 07:27:27.000000000 -0700
@@ -1008,6 +1008,7 @@
   DisplayImages(const ImageInfo *image_info,Image *image),
   RemoveDefinitions(const ImageInfo *image_info,const char *options),
   SetImage(Image *,const Quantum),
+  SetImageColor(Image *,const PixelPacket),
   SetImageClipMask(Image *image,const Image *clip_mask),
   SetImageDepth(Image *,const unsigned long),
   SetImageInfo(ImageInfo *image_info,const unsigned int flags,ExceptionInfo *exception),
diff -ur gm.old/magick/transform.c gm.new/magick/transform.c
--- gm.old/magick/transform.c	2010-02-27 13:30:13.000000000 -0800
+++ gm.new/magick/transform.c	2010-04-19 07:28:35.000000000 -0700
@@ -317,6 +317,12 @@
   register const Image
     *next;
 
+  register long
+    i;
+  
+  MagickBool
+    found_transparency=False;
+
   /*
     Coalesce the image sequence.
   */
@@ -352,9 +358,19 @@
       }
       case BackgroundDispose:
       {
+        /* fill image with transparent color, if one exists */
         coalesce_image->next=CloneImage(coalesce_image,0,0,True,exception);
-        if (coalesce_image->next != (Image *) NULL)
-          (void) SetImage(coalesce_image->next,OpaqueOpacity);
+        if (coalesce_image->next != (Image *) NULL) {
+          for (i = 0; i < (long) coalesce_image->colors; i++) {
+            if (coalesce_image->colormap[i].opacity == TransparentOpacity) {
+              found_transparency = True;
+              (void) SetImageColor(coalesce_image->next,coalesce_image->colormap[i]);
+              break;
+            }
+          }
+          if (!found_transparency)
+            (void) SetImage(coalesce_image->next,OpaqueOpacity);
+        }
         break;
       }
       case PreviousDispose:
@@ -376,6 +392,7 @@
     (void) CompositeImage(coalesce_image,next->matte ? OverCompositeOp :
       CopyCompositeOp,next,next->page.x,next->page.y);
   }
+
   while (coalesce_image->previous != (Image *) NULL)
     coalesce_image=coalesce_image->previous;
   return(coalesce_image);