I am sure the problem is related to my specific home install.

1) only specific to the instance of my ie8 install on my vista home machine because I am typing this from my work pc with ie8 and png's load just fine as well as transparency.

2) doubt it is firewall related as my other browsers load just fine.

3) I also noticed that going to >> help >> about internet explorer also shows empty box with red x for the ie 8 image in the about window?

3a) I am getting the feeling that this might be a reg fix type thing but don't know where to go because you can't un-install and re-install ie in windows.

3b) I can't find any reports of this problem anywhere on the web? maybe try ms technet?