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If you are repainting an icon on the filesystem e.g. .dir.tiff make a copy and remove it first. Then reload the directory (the default icon gets shown). This is needed because the system caches icons.
Now here comes how to create transparent backgrounds using IconBuilder:
What 'Paint in overlay mode… does, is that when checked, it will use both the alpha (opacity) of the existing pixel and the alpha selected in the color inspector and combine both into a new color. When unchecked the existing pixel will just be replaced with one using color and alpha as selected in the inspector.