RE: Problems with Tiling
When you save your PNGs, make sure you have the right color-depth, try different ones. Since the picture only is in gray-scale, your image-editor might have saved it as a gray-scale PNG which is not supported by WLM. This is the most unlikely cause, but it's worth a shot.
Have you applied any <MetaData> to that image in your SkinInfo file? The <MetaData> tag contains information about the image, how it's supposed to be displayed etc.
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