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Hi Steve, Thanks for contacting us! You are correct that some effects do not behave as you might expect on transparent pictures. This is unfortunately a limitation of these effects.
Dragging on transparent pictures from the Photo Basket shouldn’t result in any blurring. Double-check the quality of the original transparent image, as it may be that it is slightly blurry. Sometimes there is a slight delay after dragging on your image before the image fully downloads and sharpens up.
Let us know if you have any further questions or concerns! If you would like further assistance one-on-one regarding your images you can contact us here: http://www.ribbet.com/contactus.rbt