Photoshop 5.0 Transparency Question

[donnad...@adobeforums.com]

Using CS3, I can use the magic wand to select portions of an image and delete them so they will be transparent. But I can't, for the life of me, figure out or find out how to do it in 5.0. Actually, I managed to select the portion I wanted to appear, and move it into a new file with a transparent background, checked the box in the Layers Palette to preserve transparency, and saved the file. I want to be able to insert the image into a Publisher newsletter. But when I tried to insert it, the file didn't even appear in the Open File window because it was a Photoshop .psd file. I had also saved it is a .jpg file, but the transparency didn't hold when I inserted it and then his Print Preview. Any ideas? Thanks! I'm really under the gun.