Yes PNGs and I know they're different and PNG doesn't have an alpha channel but that's what I'm saying, 2D Toolkit handles this just fine with PNGs, don't need to bother with any of this. NGUI would gain a lot from doing it too, however they do it. Do you think they process the PNGs during the atlas creation to create the alpha channel and "solidify" the color channel?
I already had tools to convert my PNGs to PSDs from when I was using SpriteManager2 which had the same problem. I'll give em a go and use yours if it doesn't work. Thanks for the help, much appreciated.
Here's a comparison between NGUI and 2D Toolkit (out of the box results, no need to change shaders or process images or anything) using PNGs
