dds questions and a screenshoot woo!

[Azoz]

Ok my first question about DDS in general - I've noticed the backgrounds are not a solid color, so how does this come out as transparent?

Second question, I've created a new dds file to use for a new tab style, I wanted something to match the single_pixel window frame. I started making the file 256x256 and then tried 64x256, and no matter what I do it gets stretched out and looks like attached:

Does anyone know what I'm doing wrong? I've tried saving with and without mips as well.