Thanks lainz, that's kinda close :)
Had a look at that example and while it does allow for 1-bit Alpha it doesn't seem to really do alpha blending (as can also be seen in the screenshots in the example folder on the edges of the clock). It simply makes every pixel with A>0 white. Also toyed with the mode-argument of the PutImage method but that didn't seem to have any effect either.
It simply seems to blend the image against the window background color (clWhite by default but if you change to eg clRed you see it blends against red). Can that be changed somehow?
Chris