Can i get true transparency with pictureboxes?

You can't with 2 or more pictureboxes, but if you draw the second image on the picturebox than you can

like

Private Sub PictureBox1_Paint(ByVal sender As Object, ByVal e As System.Windows.Forms.PaintEventArgs) Handles PictureBox1.Paint
    Dim x As Image
    x = Image.FromFile("c:\yoursecondtransparentimage.gif")

    e.Graphics.DrawImage(x, 1, 1)
    End Sub

In this example I load the image in the paint event, this ofcourse isn't  advisable,  load it outside of the paint

HMMMM, I was wrong you CAN get it also with 2 pictureboxes

Private Sub Form14_Load(ByVal sender As System.Object, ByVal e As System.EventArgs) Handles MyBase.Load
        Dim x As New PictureBox
        x.BackColor = Color.Transparent
        x.SizeMode = PictureBoxSizeMode.AutoSize
        Dim Y As Image
        Y = Image.FromFile("c:\yoursecondtransparentimage.gif")
        x.Image = Y
        PictureBox1.Controls.Add(x)

    End Sub

A picturebox simulates transparency by painting the "transparent" areas the color of the parent control.  This is a problem when you want to overlap pictureboxes.

Another approach would be to get rid of the child pictureboxes completely and draw the images to your main picturebox directly.

        'Load up an image from disk
        Dim img As Image = Image.FromFile("c:\bw.gif")
        Dim bmp As New Bitmap(img)
        img.Dispose()

        'Create the graphics object to draw onto
        Dim g As Graphics = PictureBox1.CreateGraphics

        'Draw the images overlapping
        g.DrawImage(bmp, 0, 0, bmp.Width, bmp.Height)
        g.DrawImage(bmp, 20, 30, bmp.Width, bmp.Height)

Ronald...Sorry but I think you missed the point, I need true transparency so if I drag a small picturebox over another the image below is visible. The Gifs in the small pictureboxes have transparent backgrounds, but this just picks up the parent picturebox's backcolor.

Erik ...I need these things to be moveable...not painted onto one big box.

As usually i'm off to try Idlemind's suggestion...hope its as excellent as always!

Use sprites:

Transparent GDI Sprite Library
http://www.vbaccelerator.com/home/VB/Code/vbMedia/Transparent_GDI_Sprite_Library/article.asp

I just pointed you to a VB6 sample.
The concept is the same for .NET.
Let's see if I can find a .NET sample...

IdleMind comes with the goods again. Basically set the unwanted areas in my gifs to a color (bright pink) and then used his method to remove all areas of this color.