As far as I know, yes, GE detects transparency and applies it, also when talking about the collisions, as well as it will make the top-left pixel's color in the image a transparency color, and any other pixels with the same color also become transparent. I think these are all in the documentations... maybe I'm wrong, but the suggestion that GE should be re-documented seems perfectly right, since it's been... how many years??? I might help in re-documenting (or at least check it for grammatical and spelling mistakes...
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Though it also might only be wise once the new GE release is issued (I'm not thinking about the IPhone, Mac one, but the so called 2.0.0 that the development tickets mention when talking about some of the planned features... I think this might be the place for me to first mention to all of you, that I'm going to take part in GE development once this next game of mine will be finished...
About the collisions: yes, GE happens to simply miss some collisions at times... At least, I don't think the demo lacks the physical response actions...
There are rumors that if you change the mass of the objects, it happens to effect the way the collision is detected - in the positive way.