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I'm having issues with the background on transparent images. On several occasions I have removed a photo's background via magic wand, polygonal lasso, etc. I can paste the transparent pic into a new layer no problem. When I go to transform it though, it completely freaks. Is there any way around this? Am I doing something wrong or is Photoshop just a little broken?
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What do you mean by transform and freak out?
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You would need to upload your layered PSD file and post a link to it. The link you posted is to a PNG Files that has no transparency at all.
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Issues like this are usually GPU/video driver-related. Just a guess, though. Does this "freak out" involve pixels glitching?