I use Ubuntu Natty, urxvt (with 256 colours), and Imagemagick (display -window root [...]) to set the root window to a picture. When I use the transparency (-tr) option on urxvt, I get the Ubuntu X login screen background (The pink/purple one) and not the image that is currently on the root window. See picture at the bottom. Note that the same problem exists if I run gnome-terminal and set its transparency. I suspect that imagemagick is not drawing on the right X11 layer but I (and google) cannot figure out what the right option is.
There is a picture and more details (--debug X11) on the super user forum. I could copy and paste it here if needed.
http://superuser.com/questions/324718/t ... ow-problem