That's because you need an alpha channel. Peggy's instructions don't tell you how to make one.
Once again, read the sticky posted at the top of this forum. Yes, it's long, but that's because Chosen's instructions are exhaustive. You don't need to read all of it; just the part dealing with the application you use. (PS, in your case.)
Or you can go to my site, to the newest
Alpha Channel Tutorial, read a version that's PS only and includes pictures, or simply download and install the Photoshop Actions, and use them.
You'll also find a link to the Flaming Pear Solidify plug-ins (they are free.)
If you use the Actions that include the Flaming Pear filter you can make an Alpha Channel, with no white halo, with a single mouse click.
Alpha Channels are extremely simple, very basic, and ridiculously easy to make. I think the reason that we have so many questions about them here is what I call the "Glazed Eyeballs Syndrome."
When we are faced with something that we expect to be difficult, our eyeballs glaze over, and we can't believe that it's simple. So we make it very, very hard. (I tend to do the same thing with simple, basic arithmetic.)
Just relax, take a deep breath, and trust me when I say this is a snap. Anyone can make successful alpha channels. It's the easiest thing there is to do in PS. It really is.

The three sticking places, that people stumble over all the time, are;
1. You can't see them in PS. They don't seem to have any effect on your image at all. This is because they are really just saved selections, and are used for hundreds of things besides transparency. SL only uses them for transparency, though, so that's all you need to worry about here.
2. There can be only one. If you have more than a single Alpha channel, the image will upload with a totally white alpha (complete opacity). When you look at your channels palette in PS, you should see the combined RGB thumbnail at the top, then the R, G, and B channels, and then exactly one black and white Alpha channel. (It can be called anything, the name isn't important.) If you have more, delete the extras. In PSE, if you look at the Delete Selection dialog, there should be exactly one name in the list. If there are more, delete the extras.
3. They must be uploaded as 32 bit Targa (.tga) files. This takes two dialogs; the first one where you save your file, the second where you choose your bit depth. If the "Save Alpha" is dimmed in the first dialog, you don't have an alpha channel. Go back, and make one, following the instructions in the linked tutorial above. However, checking that dialog
will not give you an alpha channel. You must also check the 32 bit radio button in the small dialog that pops up next. (8 bits per channel X 4 channels (RGB and Alpha) = 32 bits.)
As you can see, none of this is difficult.

Hope this helps!