I've found the holy grail...

IE6 PNG Transparency Fix for Repeating Background Images

This hack is for making transparent pngs, actually transparent in IE6 when used as a repeating background. I'm sure most people have a hack they use for transparent png images in the html for IE6. This isn't another fix for that, again, this is for background images that repeat.

First, put a conditional statement in your head to display this hack when IE6 is used. Inside of this conditional statement you will insert the hack.

filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/images/transparent_bg.png', sizingMethod='scale');

Now, I haven't experimented much with this. I haven't tried X and Y repeating, if you do try this, post the results as a comment on this blog post. However it does work great with standard repeating of a background image.

In your normal css sheet it's business as normal, just place the background in the css and have a nice day. Below is an example of the conditional statement and the css hack.

<!--[if IE 6]>
<style>
#IE_blows {
height: 100%;
filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/images/transparent_bg.png', sizingMethod='scale');}
</style>
<![endif]-->

/* put in normal css sheet */
#IE_blows {
  background: url(/images/transparent_bg.png) repeat-y;
}
/* put in normal css sheet */