creating an image to be transparent and over lay the background?

I've created a logo in photoshop 7. now it looks good and would like to save so I can use it in my webpage so it overlays over the background color. No I have a drop shadow on the image and when I save as a gif for one the image get's muddy and the drop shadow dose not overlay right. Is there a way to do this? I've played around with the options while saving and I haven't hit on the suloustion. Basically I'm looking to save this file for a website with the best quality posible with no background in the image. Thank you in advance for any help you can offer!

try changing the opacity of the image rather than overlaying it. if you set it at arond 25 - 50% it will looklike a watermark

Transparency is either there or not there. So you have to find a way to visually simulate a gradient without using transparency, mixing it in much the same way as putting different colored pixels together to make new hues. A cheap and messy way (with appalling results) to do this is to change the drop shadow's blend mode to "Dissolve." You might also try using some filters instead. Either way it probably won't look as good as you'd like.