Panles with Tranpsarent PNGs

I am hoping someone can help me with a small theming issue, and that I am not posting this question in the wrong place. I am trying to use Schillmaina's transparent PNG trick (at http://www.schillmania.com/projects/dialog2/) as a custom style for panels. I have tried converting it, but don't have it quite right. I'll attach my style sheet (style.inc file for the panels module) and see if anyone can figure out what I am doing wrong. I think it has to do with how I am trying to split Schillmaina's template across the title content and the panel content itself. That may be where my problem is... see the screen shot for the issue I am having and thank you for any help...