I'm using Photoshop to create an aircraft panel but have problems getting rid of the jagged black lines between the panel and the transparent (backgound) area when the panel's loaded into FS2004.

I've made sure I'm using pure black (0, 0, 0) for the backgound. The problem appears to be the Photoshop bending pixels at the edge of the background.

Anyone have a technique for solving this?

If you have jagged lines on your panel BMP I suspect you're working in 8 bit resolution. For best results do all the work in 24 bit high resolution, then convert to 8 bit when the job is finished & before saving. It's a good idea to save the high resolution version first to use as your master copy for further editing if necessary. I'm used to PSP but I'm sure Photoshop has similar options.

PS. I haven't done any of this for a while so I assume most panel BMPs are still in 8 bit colors.