Hello, and welcome, Sarah!
Making stained glass, like anything else, depends on where you are going to use it, and how closely it's likely to be examined. Not just for SL, but for all 3D work, doing more work than you need to do not only wastes your time, but wastes computer cycles for rendering.
A texture with an Alpha channel is quite a bit larger than one without, and takes more time to "rez" in world.
So whether or not you choose to use that Alpha depends in large part how "important" the stained glass is going to be in your build. If it's just incidental windows, and is not likely to be examined closely, then it's probably best to just draw your stained glass, upload it as a 24 bit .tga file, and give it some measure of transparency in world. This has the added advantage of being able to "tweak" the transparency after upload, which will save you $L.
On the other hand, if the window is going to be a focal point, and you decide to have the leading solid and the "lights" (panes of glass) as various levels of transparency, then you will want to make an alpha channel, with various levels of gray, as Blaze has described.
I'm on a Mac, so I can't give you PSP instructions; but this is (briefly) how I make stained glass, using Adobe products.
First I sketch the design, scan it into the computer, and use Adobe Illustrator to make the leading. (The vector tools are just better in Illo, and they are the best way to get smooth curves and straight lines.)
I Place the vector drawing in Photoshop, give it a bevel, and use the Magic Wand tool to select the transparent panes of glass. Enlarge the Selection a few pixels, to overcome the anti-aliasing, move to a new transparent layer below the leading, and fill it with the glass color. Since I use PS, I also use a clipping plane to fill the areas with glass texture; but I have no idea how you'd do this with PSP.
When the window is done, if I'm not going to use an Alpha channel, I just upload as a 24 bit .tga file. If I do decide to use an alpha channel, I use Layer Selection to select the contents of each layer and Fill them in the Alpha channel, using the Levels tools while they are still selected to tweak the amount of gray in each. When all the glass has been transferred to the Alpha, I select the Leading, and fill that with White, to make it completely opaque. This lets me vary the levels, and therefore the transparency, to get the different degrees of transparency you find in real stained glass.
Then I Flatten, Shrink, Sharpen and Save as a Copy using 32 bit .tga. (Always flatten a copy, never the original. You never know when you'll need the original Layred file again.)
As an example, here is the Alpha channel from the Pegasus window you can find in my Texture Tutorials.
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Here is the amount of transparency that alpha gives the window.
If you want to go and take a look at the real window, in world, you'll find it at Benten (17, 105), inside the Sky Dome.
Once again, this is only to be used in windows that are focal points. For other windows, don't use the alpha, just change the transparency using the Texture controls in SL.
Hope this helps!