torn edges question

Okay, I have a question. I looked around in the memories, and I got all excited because I thought I found it, but then when I clicked it said "No such entry." And I didn't find any others that really explained this.

I was trying to make a torn paper edge kind of icon. I put a drop shadow on the edge, and it looked good, but my problem is this: I wanted the rest of the icon to be transparent - there wouldn't be anything past the torn edge. But I can't get it to work, because saving as a .gif you can't have partial transparency, which is what my drop shadow is. If I set the shadow to no blur, it just looks stupid. Does anyone know a way around this?

This is a screenshot kinda thing of what I want it to look like:


I'm using PSP8 by the way, but if you have any advice that deals with other programs I'd love that too, I can probably work with it.

Thanks so much!!!!

EDIT: I got it! Yay! Thanks so much to pidgehuss - I was able to get it by fiddling around a bit more based on what you said.