I'm using deskfolders now (instead of jdesk) - seems really buggy...what is the workaround for the transparency problem that I'm having. I read something about a painthack but it didn't really elaborate...

I think the painthack gets triggered if you have 'DeskfolderPaintHack' in your step.rc. I'm not sure, but it's somewhere in the docs.

At the begining of the doc...
But it take a snapshot of your desktop when initalizing the module. Then, it could be corrupted when windows are over this area on load/recycle...