Drop the image onto the timeline. If you drag the top corners, marked with blue triangles, into the image you can fade in and out. If you drag the top down you change the overall transparency. Once you've set your fade(s) you'll see a blue line with the transition symbol on it - right click on that symbol and you can change the way the fade behaves.
Just drag the effect onto the image. (I'm assuming your image is on one of the upper timelines and the background you want to show through is below it.) When the control window opens, you'll notice some color settings in the lower right. Just select the eyedropper and click on the background you want to remove in the preview screen. Everything that is the same color will become transparent!
One issue, though. (And I mentioned this in another post this morning.) Because of the way they are compressed, JPEGs can have jaggy edges where the colors break, making for an ugly transparency. Consider using a TIF or BMP that gives you good, clean breaks between colors.