It bugged me for a long time that the user pictures in the login window would not respect a user picture's transparency mask, but draw the icon on a white square instead. Luckily I found out how to get rid of this in Mac OS X 10.5! As this solution requires the use of Terminal, the usual "use at your own risk" applies.

Leopard stores the cache where it keeps the user pictures accessible via the command line utility dscl. Let's assume the user account whose picture we want to change is called steve. (Obviously, replace steve with the short name of your account in the following commands). Type the following into the terminal:

dscl . -read /Users/steve Picture

This should give output like this, reflecting your currently-selected image:

Picture:
 /Library/User Pictures/Animals/Butterfly.tif

There is also an entry in dscl called JPEGPhoto that contains a hex-encoded JPEG version of this picture. If you delete this JPEG version, the OS will use the TIFF, which may actually have an alpha mask!

You can do so by typing:

sudo dscl . -delete /Users/steve JPEGPhoto

Check the Picture entry again with the first command above, as it might have been reset. Now change this entry to point to your new picture; I assume you have created a new directory inside /Library/User Pictures for your own 48x48 TIFF images. Assuming you'd like to use kermit.tiff from a directory named muppets in the User Pictures directory, you'd use this command: When you log out, you should see the new user picture including the correct transparency (assuming the TIFF has some, of course). To easily create the user pictures, I used Candy Bar 3, which lets you export icons as TIFF images. Special thanks go to Craig Hockenberry of the Iconfactory for initially pointing out to me that the Finder keeps information about the user pictures in a directory accessible via dscl.

[robg adds: I haven't tested this one.]