Figured out how to do this. Still not 100% sure how the transparency works, other than #000000 is always 100% transparent. It's weird because the tutorials i followed online didn't mention anything about what color-mode to use when working with the image, and the PS3 (as of yet) only supports a greyscale image, but when i open the original .dds files in Photoshop it always opens them in RGB color... And i'm too chickenshit to try a few things out and potentially brick my PS3.
Yes, that's Kefka from Final Fantasy 6. It seems appropriate. .dds files available upon request.